- As per the plaintiffs UST is a security and Stablegains violated federal securities laws.
- Allegedly after the crash, Stablegains changed its website and advertising materials.
Stablegains, a yield platform for decentralized finance, has been sued in a California court for allegedly deceiving investors and breaking securities laws.
Alec and Artin Ohanian, the plaintiffs in the federal lawsuit filed on February 18 in the Central District of California, claim that without their permission or knowledge, the defunct DeFi platform transferred all of its customers’ cash to the Anchor Protocol.
Using the Terra USD (UST) algorithmic stablecoin from Terraform Labs, the Anchor Protocol provided returns of up to 20%. In comparison to the returns provided by Anchor Protocol, Stablegains promised its consumers a 15% gain.
Violation of Federal Securities Laws
It is also claimed by the plaintiffs that UST is a security and that Stablegains has violated federal securities laws. The company was neither registered as a securities exchange nor a broker-dealer with the U.S. Securities and Exchange Commission (SEC), according to the lawsuit.
Moreover, the Ohanians claimed that the May breakdown of the UST ecosystem had catastrophic ramifications for Stablegains’ consumers. In May, when UST unpegged from the dollar. It triggered a widespread sell-off throughout the DeFi and crypto markets. Leading to a loss of almost $18 billion in the Terra/Luna ecosystem.
Allegedly after the crash, Stablegains changed its website and advertising materials that had previously promoted UST as “safe” and “fiat-backed,” thereby admitting that UST was none of those things, as claimed in the lawsuit.
Stablegains “retained the majority of the devalued assets deposited by its users, unilaterally opting to redirect them into Terra 2.0,” rather than liquidate assets and repay monies to clients.
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