DeFi yield platform Stablegains is being sued for allegedly moving consumer assets into Anchor Protocol without informing users or seeking their consent.
Stablegains, a decentralized finance (DeFi) yield platform, was sued for allegedly deceiving investors and violating securities laws.
Plaintiffs Artin and Alec Ohanian submitted a complaint on February 18th in the US District Court for the Central District of California.
Did you know?
Want to get smarter & wealthier with crypto?
Subscribe - We publish new crypto explainer videos every week!
What is Terra Luna? History & Crash Explained (ANIMATED)
The complaint alleges that the defunct DeFi platform did not seek any consent from investors nor informed its clients that it was transferring all of their assets to the Anchor Protocol.
Anchor Protocol offered exaggerated 20% yields on Terra USD (UST), the algorithmic stablecoin issued by Terraform Labs. On the other hand, Stablegains promised users a 15% profit, taking away the difference from the gains provided by Anchor Protocol. The court filing says:
As an early supporter of and investor in TFL [Terraform Labs], Stablegains is intimately familiar with UST and LUNA. In fact, Stablegains, Inc. falsely advertised UST as a safe investment.
Moreover, the plaintiffs also claimed the UST stablecoin is security and accused Stablegains of breaking federal securities laws. The complaint adds:
Stablegains plainly failed to comply with federal and state securities laws. Stablegains failed to disclose that UST is in fact a security.
As per the court filing, the platform failed to receive registration from the US Securities and Exchange Commission (SEC) as neither a broker-dealer nor a securities exchange. The plaintiffs mentioned that clients of Stablegains suffered enormous losses after the Terra ecosystem’s collapse in May 2022.
The incident ignited a wider collapse of crypto and DeFi markets, leading to an ultimate loss of nearly $18 billion from the entire ecosystem of the Terra project. The complaint alleges that, after the disastrous crash, Stablegains modified its web portal and its material promoting UST as a “fiat-backed” and “safe” asset, indirectly admitting that UST did not have such qualities.
