Cryptocurrency exchange Binance US was handed a class-action lawsuit by investors on Monday for falsely advertising the cryptocurrency TerraUSD and Luna as safe.
The 72-page lawsuit was filed by law firms Roche Freedman and Dontzin Nagy & Fleissig on behalf of Binance US users and alleges that Binance US violated US federal and state securities laws by failing to disclose the true nauture of TerraUSD (UST).
Back in May, TerraUSD went from being valued at $18 billion to suddenly nearly zero after a dramatic downfall. Although TerraUSD was marketed as a stablecoin, the reality was TerraUSD was not backed by any real assets.
Instead TerraUSD was backed by Luna (LUNC), a volatile cryptocurrency created by Terraform Labs cryptocurrency developer Kwon Do-hyung, known as Do Kwon, designed to keep TerraUSD's price continuously at $1.
Binance US was an early supporter of TerraUSD.
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However, the failure of TerraUSD could not be saved by Luna and users were left with empty wallets.
Now, investors who lost nearly $18 billion are angry at Binance US for failing falsely advertising the coin as safe.
"Binance U.S. failed to disclose that UST is in fact a security, and that it is selling these securities, even though (i) there is no registration statement in effect for them, and (ii) Binance U.S. itself has refused to register with the U.S. Securities and Exchange Commission (“SEC”) either as a securities exchange or as a broker-dealer," the lawsuit alleges.
Following the crash, Binance de-listed Luna and TerraUSD from its platform. However, they did support Luna 2.0, the updated version of Luna designed to help investors bounce back from the original crash.
\u201cIf you purchased $LUNA or $UST on either @coinbase @krakenfx @binance or @Gemini, please reach out to TerraRecovery@rochefreedman.com . My firm is coordinating an effort to help those who lost funds from the recent collapse of #terra and #luna.\u201d