Over the course of the last month, the value of Terra stablecoin dropped from a high of about $119 to just pennies after the coin lost its peg to the U.S. dollar. As a result, investors holding TerraUSD and Terra’s native LUNA asset almost immediately saw their portfolio value plummet. While many assume that cryptocurrencies are not regulated and that there is no recourse following a major devaluation, that isn’t necessarily the case. United States securities laws provide some important protections to crypto investors, and investors who lost money on TerraUSD may have a claim against any and all involved parties, including individuals, companies, platforms and exchanges that promoted the Terra coin as stable.

Did you invest in Terra stablecoin? Are you confused by the reports that the cryptocurrency lost its peg to the U.S. dollar? Are you looking for ways to recover some of the money you lost on TerraUSD? If so, it is important to understand that you have options and walking away from your loss almost certainly means never seeing your money again. To learn more about the rights of cryptocurrency investors and their ability to pursue a claim for compensation, read more on our recent post on the topic here.

What Is TerraUSD?

TerraUSD is a stablecoin created by Terraform Labs in 2018, which is a blockchain company that was founded by Do Kwon and Daniel Shin. Do Kwon is largely accepted as the “founder” of TerraUSD and has vehemently attacked critics of the stablecoin in the past. However, in the wake of the recent devaluation of TerraUSD, his tone has noticeably changed to a much more conciliatory one, explaining, “I am heartbroken about the suffering my innovation has caused you all.”

What Happened to Terra Stable Coin?

TerraUSD is a stablecoin, meaning it is a type of cryptocurrency that is pegged to a certain currency. In the case of TerraUSD, the coin is pegged—or is supposed to be pegged—to the U.S. dollar. Thus, when things operate as planned, one Terra stablecoin is worth one U.S. dollar. Investors of TerraUSD then generate income in interest paid to them for holding the currency. A few months ago, TerraUSD holders were earning approximately 20 percent in interest for each coin they held.

However, maintaining a peg to the U.S. dollar is easier said than done. And the value of a stablecoin is inherently tied to its ability to maintain its peg to the underlying asset. Thus, when the interest rate paid to TerraUSD investors changed, holders sold their assets and bought other coins. This sent the value of LUNA, the backing cryptocurrency used to maintain the coin’s dollar peg, plummeting. In response, Terra stablecoin became anything but stable and tanked.

Do TerraUSD Investors Have a Legal Remedy?

Many think of cryptocurrency as an unregulated asset. And in some ways, it is. However, the federal government imposed some regulations on cryptocurrency companies, exchanges and platforms. Of course, cryptocurrency regulations are not as well-developed as they are for other investable assets, but the individuals who created the coin and the platforms and exchanges that promoted them are bound by laws prohibiting them from making fraudulent and misleading statements.

Cryptocurrency lawyers and securities attorneys are investigating the downfall of TerraUSD on behalf of investors, trying to determine if what happened was preventable or the product of fraud or misrepresentation. Depending on the outcome of the investigation, aggrieved investors may have a claim against one or more parties following the Terra stablecoin collapse.

Those who lost money on Terra stablecoin as a result of the collapse should reach out to a cryptocurrency lawyer to learn more about their rights and how they can effectively pursue them.