Bloomberg News reports that an investor in Terra USD sued Binance US, claiming that the crypto exchange had not adhered to federal regulations, leading to disastrous results for its customers when the crash of stablecoin occurred in the past month.
A resident of Utah, Jeffrey Lochart, on Monday filed a lawsuit in San Francisco’s federal court against BAM Trading Service Inc., which is engaged in business as Binance.US, complaining that the exchange has not followed the norms of the regulator and that it has failed to divulge that TerraUSD is security. He has sought an injunction blocking Binance from extending it for purchase or sale unless and until it is registered as such and damages unspecified. He is aiming to represent a group of investors just like himself.
TerraUSD was supposed to maintain a 1-to-1 peg to the US dollar through the algorithm and trading in Luna, which is a corresponding token. Because of the peg, stablecoins can serve as a haven for investors in a volatile cryptocurrency market.
Since a security stablecoin was not registered, investors were not aware of the disclosures to protect them, stated Lockhart.
Bloomberg News also reported in the past week that US Securities and Exchange Commission is investigating whether the TerraUSD marketing defied rules that were in place to safeguard the investors. The implosion of Terra in the last month was one of the largest that had taken place in the history of crypto, wiping out almost in value equal to tens of billions of dollars and sending shockwaves throughout the markets.
In his suit, Lockhart revealed that Binance had sold TerraUSD. There was no registration statement for the same, and Binance did not register with the SEC as a broker-dealer or securities exchange. He also said Binance continued selling the securities that Singapore-based Terraform Labs created. When the sale of Luna 2.0 commenced, it “added insult to injury.
