The complaint claims that the exchange misrepresented Terra as a secure asset.
A Utah individual has sued Binance US and its CEO, alleging that they falsely advertised TerraUSD as a safe asset backed by fiat currency. Because Binance isn’t regulated as a securities exchange with the US government, the plaintiff, Jeffrey Lockhart, claims that it has only a limited obligation to provide information regarding assets exchanged on its site. According to Reuters, the law firm representing Lockhart stated, “Crypto exchanges earned significant profits by flouting securities regulations and causing genuine harm to real people.”
However, a Binance spokesman told the news outlet that the exchange is registered with the Financial Crimes Enforcement Network of the US Treasury Department and follows all necessary requirements. “These claims are without substance, and we will forcefully defend ourselves,” they stated.
TerraUSD’s value plummeted in May, creating large losses for investors who relied on its designation as a stablecoin that was meant to keep its $1 per coin worth. TerraUSD, however, is a “algorithmic” stablecoin that is not backed by fiat currency, unlike other stablecoins backed by real-world assets. Instead, it’s backed by the Luna cryptocurrency, which has a built-in mechanism to restore its value to $1 if it ever drops. Investors were lured to participate in TerraUSD because of the possibility to profit from the Anchor loan scheme, which promised yearly returns of 20% for TerraUSD deposits. Terra’s mechanism, on the other hand, has failed to protect its value, and it is now worth less than one penny.
Lockhart wants his complaint to be filed as a class action on behalf of all Terra investors who bought the cryptocurrency from Binance. Due to a “blocked on-chain transaction,” the world’s largest cryptocurrency exchange also halted bitcoin withdrawals for a few hours yesterday. Binance had become a hub for fraudsters and drug traffickers, according to sources, and had assisted in the laundering of $2.35 billion in illicit cash.
