@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.”
I would like to have a little heart-to-heart with you guys about the status of our potential class action against Terraform Labs, Do Kwon et al. seeking restitution for UST victims. As you may have heard, we were exploring a community litigation fund to be released soon. (1/17)
— FatMan (@FatManTerra) May 24, 2022
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.
This fund already existed – it was pitched to me by two trusted lawyers (both real; one public, one anon) and a supposed fund manager (anon). This happened several days ago, and it looked like the perfect solution as it was cheaper for the victims and ready-made. (2/17)
— FatMan (@FatManTerra) May 24, 2022
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.
Firstly, I insisted that someone trusted and public-facing should be added to the multisig. I suggested Cobie or a US law firm. The fund contacted a fourth lawyer (a legitimate one) and he was added as a multisig holder. I was relieved, and things were looking good. (5/17)
— FatMan (@FatManTerra) May 24, 2022
Wait, @FatManTerra isn’t sold on the DAO?
@FatManTerra’s tweetstorm takes a twist when he expresses doubts about the DAO.
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.”
Two – 50% of the tokens raised would be given to the multisig holders to 'slowly distribute' to the community. I assumed that all tokens would go to donors, and this part didn't really make sense to me – a legitimate DAO would not have this level of centralization. (7/17)
— FatMan (@FatManTerra) May 24, 2022
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.”
Over the past few days, they pressured me to release their links to the public ASAP. I was patient and I told them I needed some time to think. I'm glad I did. Due to these new facts, I have decided not to share their link with the public. There were too many red flags. (9/17)
— FatMan (@FatManTerra) May 24, 2022
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.
The best part of all? This action will be free for our class of victims to join. They pay nothing upfront & nothing if we lose – if we win, they are given their UST debt (minus legal fees) straight into their pocket. Contingency, although expensive, is quite neat. (14/17)
— FatMan (@FatManTerra) May 24, 2022
Negotiations are currently taking place to get “the best possible deal” for the victims.
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