• Stablegains, a decentralized finance yield platform, is being sued in a Californian court for allegedly misleading investors and failing to comply with securities laws.
• The plaintiffs allege that Stablegains funneled customer funds into Anchor Protocol without their knowledge or consent and falsely advertised UST as a “safe” investment.
• The complaint also states that the firm failed to register with the U.S. Securities and Exchange Commission either as a securities exchange or as a broker-dealer.
Stablegains Sued For Misleading Investors
Decentralized finance yield platform Stablegains has been sued in a Californian court for allegedly misleading investors and failing to comply with securities laws. On Feb. 18, plaintiffs Alec and Artin Ohanian filed a complaint in the U.S. District Court for the central district of California, alleging that the shuttered DeFi platform diverted all of its customer funds to the Anchor Protocol without their knowledge or consent.
Falsely Advertised UST As A Safe Investment
Anchor Protocol offered yields of up to 20% on the Terraform Labs algorithmic stablecoin, Terra USD (UST). The plaintiffs also allege that UST was a security and that Stablegains broke federal securities laws by falsely advertising UST as a safe investment without disclosing that it is in fact a security. Furthermore, Stablegains failed to register with the U.S. Securities and Exchange Commission either as a securities exchange or as a broker-dealer, according to the complaint filed by Alec and Artin Ohanian.
Collapse Of UST Ecosystem Causes Disastrous Consequences
The collapse of UST caused disastrous consequences for Stablegains’ customers during May’s broader run on DeFi and crypto markets which eventually led to around $18 billion loss from the Terra/Luna ecosystem.. Following this collapse, Stablegains allegedly altered its website and promotional material touting UST as “safe” and “fiat-backed”, effectively conceding that UST was none of those things according to the complaint stated by Alec & Artin Ohanian.
Stablegains Retain Majority Of Devalued Assets
Instead of liquidating assets and returning funds to customers, Stablegains retained majority of devalued assets deposited by its users unilaterally opting them into Terra 2.0 project according to Plaintiffs statement in court filing document .
Discontinuation Of Service Announced By Company
The company has announced discontinuation of service urging its customers withdraw remaining funds . In addition , company released anticipated timeline along with letter from team about ongoing situation .