A class action lawsuit by Terra investors against Terraform Labs (TFL) and its CEO, Do Kwon, has been filed in the Northern District of California court seeking reimbursement of the purchase price of the tokens.

Kwon is accused of selling unregistered securities and making false claims about the stability of the stablecoin TerraUSD (UST) and related token LUNA.

The list of defendants named in the lawsuit includes Jump Crypto, Jump Trading, Republic Capital, Republic Maximal, Tribe Capital, DeFinance Capital, DeFinance Technologies, GSR Markets, Three Arrows Capital and Nicholas Platias.

Plaintiffs allege that members of the nonprofit Luna Foundation Guard misled UST/LUNA investors that an available reserve fund would be enough to protect them from a “banking panic.”

“However, between May 6 and May 9, structural weaknesses in the Terra ecosystem caused UST and LUNA prices to drop by approximately 91% and 99.7%, respectively, over the course of a week,” the lawsuit says.

Investors also noted that with all indications of investment contracts, Terra tokens have “no registration applications.” SEC did not come.”

Plaintiffs seek monetary compensation corresponding to the purchase price of Terra tokens and legal costs. TFL representatives did not comment on the situation.

In parallel, South Korean media reported that an interagency group affiliated with the Seoul Southern District Attorney’s Office banned a certain “Mr. A”, one of Terra’s key developers, from leaving his country.

He previously claimed that Do Kwon secretly sold the money to anonymous “institutions” and earned “enough to buy an island”. The investigation has yet to determine whether these funds were used to manipulate the market price of the token.

The media suggest that in the near future law enforcement may search and confiscate the company’s documents. The prosecution is now coordinating an investigation program with Terra officials. The agency is also conducting a legal investigation into Do Kwon’s involvement in fraudulent activities.

Recall that on May 8, the UST lost its peg against the US dollar. This happened against the background of the exit of assets from the Anchor protocol as the rate of return on deposits dropped to 17.87%.

On May 10, the asset’s prices fell below $0.62. The decline continued on May 11, after which the LUNA cryptocurrency used to issue the UST fell to $0.3.

Following the collapse of the ecosystem, South Korean financial regulators held an emergency meeting to assess the impact of the event. According to media reports, local authorities began checking Terraform Labs employees as part of the investigation.

In May, LKB & Partners, one of South Korea’s leading law firms, announced plans to sue Kwon.

In June, Bloomberg sources spoke about the investigation launched into the IHR by the US Securities and Exchange Commission.

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