'Astronomical' damages claimed in suit against Luna's Do Kwon

LKB & Partners filed a complaint on behalf of five clients against Terraform Labs and its co-founders on Thursday.

LKB & Partners attorneys speak to reporters at the Seoul Southern District Prosecutors' Office after filing a complaint against Terraform Labs and co-founders Do Kwon and Daniel Shin on Thursday. [YONHAP]

LKB & Partners filed a complaint on behalf of five clients against Terraform Labs and its co-founders on Thursday.

Kim Hyeon-kwon, an attorney at the law firm, submitted the complaint against the company, Do Kwon and Daniel Shin to the Seoul Southern District Prosecutors' Office for fraud and fund-raising without approval.

LKB & Partners represents a group of people who invested in Terra coins — TerraUSD and Luna — that crashed last week.

"It's risky to conclude that the fraud can't be established at this point," said Kim. "Whether it can be established will be found out from the investigation."

TerraUSD, a stablecoin pegged to the dollar, traded at around 9 cents on Thursday following the crash last week. Luna, which was designed to support the peg, traded around 0.015 cents on the same day, compared to the $119.18 peak on April 5.

It may end up being the most dramatic financial collapse in history in terms of the speed and percentage of value lost.

"The act of attracting investment by designing Luna and Terra coins and not properly disclosing the errors and flaws of the algorithm — and infinitely expanding the issuance of Luna coins, unlike the plan outlined in the whitepaper — constitute fraud," LKB & Partners asserted in a statement, referring to the first whitepaper published for the Terra-Luna coin issuance.

"This case is very complicated and entails lots of legal issues," it wrote, adding that the scale of the damages is "astronomical."

A group of investors joined an online community hosted on Naver to file a class action lawsuit against Kwon. More than 2,100 members have subscribed to the Lunascam community since it was created on May 13. They're blaming both Kwon and Shin.

It is not clear whether LKB's clients are involved in Lunascam.

"They are swindlers who gathered people from around the world, issued coins, pulled up the price to the peak, sold massively and secretly dissolved the business without suffering any losses," the main post read.

While Terraform Labs is a Singapore-incorporated company, it was registered to conduct business as Terraform Labs Korea in Korea, with a main branch in Jung-gu, Busan, and a branch in Seongdong District in eastern Seoul.

According to Supreme Court records, the registration in Korea was listed as "dissolved" on April 30.

BY JIN MIN-JI [jin.minji@joongang.co.kr]