Stablegains, a yield generation app, could face a lawsuit after the company lost over $42 million worth of users’ funds by investing in Anchor protocol after converting them to UST.
The collapse of the Terra ecosystem, which occurred last, continues to unfold; several projects built on the Terra blockchain were affected by the recent LUNA/UST crash.
Stablegains, a yield generation app that gives users 15% APY on USD, is most likely to face a potential lawsuit after losing over $42million of its customers’ funds from the recent crash.
The company is alleged to have lost almost all of its depositors’ funds based on a post published by Stablegains co-founder Kamil Ryszkowski on the Terra forum.
In the post, the co-founder asked for relief funding for the project. Also, he declared a day before Terra’s stable coin UST lost its $1 peg that its total users’ funds are over 47.6 million UST from 4,878 depositors.
Against that background, the Erickson Kramer Osbourne (EKO) opened an investigation into the Terra ecosystem collapse for a possible class action.
The EKO sent a letter to Stablegains, dated May 14, requesting records of customers’ accounts, the company’s marketing materials, and any communications regarding the UST stable coin.
You owe an ‘uncompromising duty to preserve any evidence you know or reasonably should know will be relevant evidence in a pending lawsuit,” the letter further added that “failure to comply may result in civil or criminal penalties.
Furthermore, documentation from the yield generation app, which was updated seven days ago, claims that USDC and UST were the major stable coins it used. Its website also maintained Anchor as its go-to protocol, noting it as the basis for its stable 15%+ APY rate.
In addition, the cached results of its webpage said it allocates funds “across a number of stablecoins to not be fully exposed to the potential instability of one stablecoin.” However, customers alleged the company had amended the wording on how it mitigates risks associated with its platform stating it solely used UST.
Also, Stablegains has opened withdrawals in USDC for its users. Still, the payment will be provided at the present market value of UST, noting the part of its terms and conditions that state the company isn’t liable for losses due to changes in the exchange rate.
