Terra community litigation fund’s details raise ‘red flags’


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@FatManTerra tweeted details of a community litigation fund that aims to compensate victims of the Terra scandal and clarified that he would not promote or share the link due to “red flags.”

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Earlier this month, Terra’s UST stablecoin lost its $1 price peg triggering a collapse in the price of the backing LUNA token. $60 billion disappeared, leaving victims devastated as a result.

Initial analysis of the situation laid blame on the fragile algorithmic pegging mechanism. But allegations have since emerged that foul play was at hand.

The social impact of the scandal has been catastrophic. Victims report mental health issues, and many have even contemplated self-harm and suicide.

Details of Terra litigation fund

In a bid to compensate victims, @FatManTerra spoke of a community litigation fund touted as “the perfect solution,” a cheaper, “ready-made” option.

The fund will take the form of a Decentralized Autonomous Organization (DAO). Supporters of the cause can contribute and, as with DAOs, gain voting rights in the decision-making process.

But considering the lack of regulation around cryptocurrencies, it’s unclear whether this DAO can deliver on what is promised. Or even if a blockchain solution is the right call under these circumstances.

Nonetheless, @FatManTerra said the funds would be held in a multisig wallet that requires approval from three individuals to authorize transactions.

@FatManTerra also mentioned the addition of a public figure, a lawyer, into the fold so victims and supporters can feel assured that the fund is legitimate.

Wait, @FatManTerra isn’t sold on the DAO?

@FatManTerra’s tweetstorm takes a twist when he expresses doubts about the DAO.

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In particular, it emerged that the DAO would redistribute half of the donations to the community. @FatManTerra questions why 100% doesn’t go back to the donors and why the DAO has “this level of centralization.”

In addition, why would donors contribute to support victims and have funds redistributed back to them? Surely a donation is given to further a cause without expecting a return.

@FatManTerra said he was pressured to promote the DAO but said he told them he needed time and refused to cave and is glad he didn’t because “there were too many red flags.”

Despite this seemingly shady attempt to profit from the Terra crisis, @FatManTerra said the exposure he’s been getting has led to “high profile law firms” and  “litigation funders” contacting him.

Three law firms he’s been in contact with have put up $15 million and agreed to work on a contingency fee basis, meaning a fixed percentage rate payable only if the case wins.

Negotiations are currently taking place to get “the best possible deal” for the victims.

Posted In: Terra, Culture




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