Terraform Labs, the blockchain technology company behind the Terra/Luna ecosystem, is seeking to dismiss a class action lawsuit filed against it by investors.
The firm argues that the United States securities laws referenced in the lawsuit are not applicable to its foreign-developed protocols.
The lawsuit, filed by investor Nick Patterson, alleges that Terraform Labs sold unregistered securities and misled investors.
However, the company’s attorneys, Dentons, claim that federal securities laws do not apply since the protocols were developed and used outside of the United States.
The Terra/Luna ecosystem crashed in May 2022, resulting in billions of dollars being wiped out from the crypto markets.
This has led to numerous lawsuits being filed against the company, associated entities such as the Luna Foundation Guard, and founder Do Kwon.
This particular class action was filed in June 2022, with the plaintiff claiming that the Terra tokens (UST and LUNA) were securities, among other allegations.
Terraform’s dismissal motion argues that federal securities laws and the mail and wire fraud accusations in the suit only apply domestically.
Terraform also argues that the plaintiff failed to identify the location of digital wallets containing his Terra tokens, negating any “domestic injury” claims.
In addition, the firm’s dismissal motion claims that the plaintiff did not adequately plead that mail and wire fraud allegations occurred domestically.
Terraform and Do Kwon are also facing a securities fraud lawsuit filed by the Securities and Exchange Commission (SEC) in February. In April, a South Korean court ruled that LUNA was not a security under the country’s Capital Markets Act.
On April 25, Terraform Labs co-founder Hyun-seong Shin and nine individuals associated with the firm were indicted in South Korea.
