TerraUSD/LUNA: Investors Seek Compensation
The Terra ecosystem entirely disintegrated in May 2022, wiping out much of the cryptocurrency market’s worth. Terra USD (UST) Algorithmic stablecoin fell much below its $1 peg, while its subsidiary token Luna fell to almost zero. While the general market is already rebounding, the loss of UST and Luna has wiped away many cryptocurrency investors’ funds. The Terra community, including Do Kwon, has proposed ways to restore the harm.
What about compensation?
In May, Luna Foundation Guard (LFG), the Singapore-based nonprofit organization behind TerraUSD, stated that it spent the majority of its funds to defend the dollar peg. It will attempt to recompense certain consumers for losses using the remaining resources. Previously, Luna Foundation Guard announced on Twitter that it will use its remaining assets to compensate its users, including the smallest holdings, though it has yet to determine the best manner to do so.
To maintain TerraUSD, the company has amassed a substantial reserve of more than 80,000 bitcoins and millions of dollars in other stablecoins. However, according to TerraUSD, it has spent attempting to sustain the token. LFG previously stated that it will amass a $10 billion bitcoin reserve. According to the company’s Twitter account, 313 bitcoins and other resources are still in the reserve.
The lawsuit against Do Kwon
Terra investors have launched a class-action lawsuit against Terraform Labs (TFL) and its CEO Do Kwon in the Northern District Court of California, claiming restitution for the purchase price of tokens. Kwon is accused of marketing unregistered securities and making false claims regarding the stability of the TerraUSD (UST) stablecoin and the associated LUNA token.
Jump Crypto, Jump Trading, Republic Capital, Republic Maximal, Tribe Capital, DeFinance Capital, DeFinance Technologies, GSR Markets, Three Arrows Capital, and Nicholas Platyas are among the defendants cited in the lawsuit.
“Plaintiffs claim that members of the charity Luna Foundation Guard deceived UST/LUNA investors into believing that the reserve money was adequate to prevent them from a banking crisis.”
Meanwhile, the TerraUSD fall has piqued the interest of authorities, who are now debating the function and position of this asset type in the crypto-asset system. Fabio Panetta, a member of the European Central Bank’s Executive Board, also stated on Monday that stablecoins are subject to panic.
Furthermore, the Federal Reserve of the United States noted that stablecoins frequently suffer from investor panic since they are backed by assets that may devalue or become illiquid in times of market stress.
Tether, the world’s largest stablecoin, too momentarily lost its 1:1 peg to the US dollar on May 12 but quickly regained it. Tether, on the other hand, is backed by reserves in conventional assets, as opposed to TerraUSD.
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