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Stablegains in hot water after losing more than $40M due to Terra’s collapse

  • May 20, 2022
  • Posted by: admin
  • Category: BitCoin, Blockchain, Cryptocurrency, Investments
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Yield app Stablegains faces allegations of misusing clients’ money — and possibly a lawsuit — after losing more than $42 million, which it had invested in UST via Anchor protocol without informing clients.

According to allegations posted on social media, the company promised clients a 15% gain on their USDC and fiat USD deposits. However, it took the money and put it into UST in Anchor for a 20% yield and skimmed the profits above 15%. Clients were unaware of this until the firm incurred millions in losses when UST depegged from the dollar and crashed to less than 1 cent.

The news first surfaced online when one investor shared a letter sent to Stablegains by law firm Erickson Kramer Osborne. The letter stipulated that the company should preserve and maintain all communications and records in case of potential litigation.

Stablegains denies culpability

Stablegains has publicly denied the allegations and said it has always been transparent about its yield coming from UST and Anchor.

Stablegains also said:

“We have made it clear across relevant learning center articles, and our Terms of Use that all funds deposited are placed in Anchor Protocol using UST and that this is the only DeFi protocol we integrate with,” part of the tweet read.

However, further allegations on social media claim that the company has started editing and updating its terms of services to avoid liability. It has also changed the USD denomination on its page to UST.

Investors claim the company has not been transparent and has started to change the information on various pages of its website since the UST crash.

Trying to dodge liability?

Stablegains is also asking investors who want to withdraw their deposits to sign a waiver that it is not liable for any losses incurred due to exchanging UST for USDC and fiat.

Investors are being forced to withdraw as they will not be eligible to receive an airdrop of the forked Terra LUNA token if they hold their UST in Stablegains.

“Under no circumstances shall Stablegains be liable for losses due to the exchange rate of UST to USDC at the time of processing your USDC withdrawal request.”

 

Other companies affected by the collapse of Terra LUNA

The Stablegains fiasco represents a continuity of the fallout from the UST collapse. Several retail investors lost billions of dollars due to the collapse. Binance also recorded a loss after the $1.6 billion LUNA tokens dropped to less than $3,000.

One of the biggest losers is Hashed Ventures. The venture capital firm based in Seoul appeared to have lost $3.5 billion after LUNA crashed due to staking about 50 million LUNA tokens.

Delphi Digital has also admitted its loss due to the Terra crash. The research firm and investor stated that it had misgivings about LUNA and UST but thought the Bitcoin reserves would prevent its crash.

The post Stablegains in hot water after losing more than $40M due to Terra’s collapse appeared first on CryptoSlate.

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