Binance.US Slapped with Lawsuit: Terra's Collapse Triggers Investor Action
Binance.US is facing a significant legal challenge in the wake of the Terra (LUNA) and UST stablecoin collapse. A new lawsuit alleges the cryptocurrency exchange misled investors regarding the stability and risks associated with Terraform Labs' tokens.
Binance US has been slapped with a lawsuit that alleges the cryptocurrency exchange misled investors about Terraform Labs’ tokens, CoinDesk reported. Terra investors are suing Binance.US, alleging that the exchange used deceptive marketing tactics after the disastrous failure of Terra's ecosystem.
The suit, which was filled by U.S.-based law firm Roche Freedman LLP, alleges that Binance.US marketed Terra’s dollar-based UST as more stable than it actually was. This portrayal of UST, the plaintiffs argue, ultimately contributed to significant financial losses for investors when the algorithmic stablecoin de-pegged from the US dollar.
According to the filing, Binance.US misrepresented the stability of UST. The lawsuit claims Binance.US knowingly presented UST as a safe and reliable investment, despite allegedly being aware of the inherent risks associated with its algorithmic structure and potential for instability.
This was the first lawsuit filed by US-based Roche Freedom LLP, claiming that Binance misled Terra network investors by portraying Terra’s dollar-based UST as more secure than it ultimately proved to be. The law firm intends to prove that Binance.US engaged in deceptive practices that lured unsuspecting investors into the Terra ecosystem.
The lawsuit adds to the ongoing legal woes for Binance and its related entities. In the latest development in the U.S. Securities and Exchange Commission (SEC) lawsuit against Binance, Binance.US, and former CEO Changpeng Zhao, the securities regulator recently filed further allegations of regulatory violations. This new suit linked to the Terra collapse further complicates the legal landscape for the exchange.
The prices of various cryptocurrencies, including those associated with the Terra ecosystem, experienced extreme volatility following the UST de-pegging event. This volatility led to widespread losses for investors and heightened scrutiny of cryptocurrency exchanges and their marketing practices.
This lawsuit against Binance.US highlights the growing concern regarding the marketing of cryptocurrency products and the responsibility of exchanges to accurately represent the risks associated with these often-complex financial instruments. The case is expected to shed light on the due diligence processes of cryptocurrency exchanges and their obligations to protect investors.