July 24, 2024
Latest News

Yield platform Stablegains sued for promoting UST as a ‘safe’ investment

A lawsuit for client damages has been filed against the now-defunct stablecoin yield platform after it was claimed that monies from consumers were transferred into Anchor Protocol without their knowledge or consent.

Stablegains, a decentralized financial yield platform, has been sued in a Californian court for allegedly defrauding investors and breaking securities regulations.

In a lawsuit filed on February 18 in the U.S. District Court for the Central District of California, the plaintiffs Alec and Artin Ohanian claim that the shutteredDeFi platform secretly transferred all of its users’ money to the Anchor Protocol without their knowledge or permission.

With the algorithmic stablecoin Terra Dollar from Terraform Labs, Anchor Protocol promised payouts of up to 20%. (UST).”Stablegains is well-versed in UST and LUNA as an early backer of and investor in TFL [Terraform Laboratories]. In actuality, UST was misrepresented by Stablegains, Inc. as a secure investment.

Stablegains offered a 15% gain for its clients, pocketing the difference between that and the returns Anchor Protocol was providing.Additionally, the plaintiffs claim that Stablegains violated federal securities laws and that UST was a security: “Stablegains manifestly failed to comply with federal and state securities laws.” That UST is a security was not disclosed by Stablegains.

The complaint also stated that the company did not register as a securities exchange or broker-dealer with the U.S. Securities and Exchange Commission.

The Ohanians claimed that after the UST ecosystem collapsed in May, there were “disastrous implications for Stablegains’ consumers.” As UST de-pegged from the dollar in May, the DeFi and cryptocurrency markets experienced a wider run, resulting in a loss of roughly $18 billion for the Terra/Luna ecosystem.

The case claimed that Stablegains changed its website and marketing materials after the crash, clearly admitting that UST was not safe or supported by fiat currency.

Stablegains “retained the majority of the devalued assets deposited by its users, unilaterally electing to reroute them into Terra 2.0,” the statement continued, instead of liquidating assets and returning money to clients.

Launched in August 2021, Stablegains closed on May 22. It asked users to remove their money before it stopped offering its services, apps, and support for Anchor Protocol. According to Cointelegraph, Stablegains was the target of a comparable lawsuit at the time.