JULIAN MORENO BELTRAN & 9 Ors v TERRAFORM LABS PTE. LTD. & 2 Ors

Case Details

• Citation: [2025] SGHC(I) 17
• Court: Singapore International Commercial Court
• Decision Date: 7 July 2025
• Coram: Anselmo Reyes IJ
• Case Number: Originating Application No 3 of 2024; Summons No 37 of 2025
• Hearing Date(s): 13–16, 20–22, 27, 29–30 May, 17 June 2025
• Claimants / Plaintiffs: Julian Moreno Beltran & 9 Ors (Representative Claimants)
• Respondent / Defendant: Terraform Labs Pte. Ltd. & 2 Ors
• Counsel for Representative Claimants: Mahesh Rai s/o Vedprakash Rai, Yong Wei Jun Jonathan, Samuel Soo Kuok Heng, Tammie Khor, Loh Renn Lee Daniel (Drew & Napier LLC)
• Practice Areas: Contract; Misrepresentation; Tort; Cryptocurrency

Summary

The judgment in Julian Moreno Beltran & 9 Ors v Terraform Labs Pte. Ltd. & 2 Ors [2025] SGHC(I) 17 represents a landmark determination by the Singapore International Commercial Court (SICC) regarding the liability of cryptocurrency protocol developers for the collapse of algorithmic stablecoin ecosystems. The dispute arose from the catastrophic "Terra-Luna crash" of 7 May 2022, which saw the TerraUSD (UST) token lose its peg to the US Dollar, resulting in billions of dollars in market value evaporation. Ten representative claimants, acting on behalf of a broader class of 356 individuals, sought damages against Terraform Labs Pte. Ltd. ("Terraform"), its co-founder Do Hyung Kwon ("Mr Kwon"), and the Luna Foundation Guard Ltd ("LFG"). The causes of action spanned fraudulent, negligent, and innocent misrepresentation, breach of unilateral contract, inducement of breach of contract, and unlawful means conspiracy.

The SICC, presided over by Anselmo Reyes IJ, conducted a granular analysis of seven pleaded representations made by the defendants through various channels, including the Terra White Paper, social media communications, and official press releases. The court’s central holding was that five of these seven representations constituted fraudulent misrepresentations. These statements, which concerned the stability and algorithmic self-healing mechanisms of the Terra protocol, were found to be false and made with the requisite mens rea for deceit. Specifically, the court found that the defendants had represented the UST peg as being maintained by robust market forces and an arbitrage mechanism that was, in reality, vulnerable and insufficient to withstand the volatility that eventually occurred. The court held that these representations induced several of the representative claimants to purchase or retain UST tokens to their detriment.

However, the court rejected the claimants' broader contractual and tortious theories. The claim for breach of unilateral contract failed because the court determined that the defendants' public statements and ecosystem descriptions did not constitute a clear, unequivocal offer capable of acceptance by the act of purchasing tokens. The court emphasized that descriptions of a protocol’s intended functioning do not, without more, amount to a contractual guarantee of performance. Furthermore, the claims for inducement of breach of contract and unlawful means conspiracy were dismissed for lack of evidence regarding the specific intent to injure the claimants. The court also addressed a significant counterclaim by Terraform, granting a declaration that the claimants were bound by certain terms and conditions hyperlinked on the defendants' websites, which included relevant disclaimers.

Ultimately, the court awarded damages to specific representative claimants who could prove individual reliance on the fraudulent misrepresentations. For instance, Mr. Davis was awarded US$5,983.12. The assessment of damages was strictly on a reliance basis, aimed at restoring the claimants to the position they would have occupied had the misrepresentations not been made, rather than an expectation basis. The court also applied rigorous mitigation principles, noting that losses incurred after the falsity of the representations became (or should have been) apparent were not recoverable. This judgment provides a critical framework for how Singapore courts will treat "white paper" representations and the limits of developer liability in the decentralized finance (DeFi) space.

Timeline of Events

1. 9 February 2021: Early developmental milestones or communications related to the Terra protocol (referenced in evidence).
2. 12 October 2021: Specific communications regarding the Terra ecosystem and UST stability mechanisms.
3. 1 November 2021: Further representations made regarding the integration of UST within the broader crypto market.
4. 11 November 2021: Key dates for representations cited in the factual matrix.
5. 29 December 2021: Luna Foundation Guard Ltd (LFG) is incorporated in Singapore as a public company limited by guarantee.
6. 2 January 2022: Early 2022 communications regarding the "Anchor Protocol" and its yield-bearing capabilities.
7. 12 February 2022: Representations made concerning the LFG reserve and its role in defending the UST peg.
8. 22 February 2022: Further public statements by the defendants regarding the stability of the Terra-Luna arbitrage mechanism.
9. 13 March 2022: Critical period for representations leading up to the market volatility.
10. 12 April 2022: Final phases of representations before the de-pegging event.
11. 30 April 2022: Statements regarding the robustness of the protocol immediately preceding the crash.
12. 7 May 2022: The Terra-Luna crash occurs; UST begins to lose its 1:1 peg with the USD.
13. 8 May 2022: Continued de-pegging; defendants issue communications attempting to reassure the market.
14. 10 May 2022: Significant price drop in UST and LUNA; the "return to form" tweet and other social media interventions occur.
15. 13 May 2022: The Terra protocol is effectively halted or enters a terminal state for many investors.
16. 1 March 2023: Commencement of legal proceedings or significant procedural steps leading to the representative action.
17. 26 February 2024: Originating Application No 3 of 2024 is filed.
18. 13 May – 17 June 2025: Substantive hearings conducted before the SICC.
19. 7 July 2025: Anselmo Reyes IJ delivers the judgment in [2025] SGHC(I) 17.

What Were the Facts of This Case?

The factual matrix of this case centers on the rise and fall of the Terra ecosystem, a decentralized blockchain protocol developed by Terraform Labs Pte. Ltd. The ecosystem was built around two primary digital assets: TerraUSD (UST), an algorithmic stablecoin, and LUNA, its sister governance and utility token. Unlike collateralized stablecoins (such as USDC or USDT), which are backed by fiat reserves, UST relied on a complex "mint-and-burn" arbitrage mechanism to maintain its value at exactly US$1.00. The protocol was designed such that users could always swap 1 UST for US$1.00 worth of LUNA, and vice versa. If UST fell below US$1.00, arbitrageurs were incentivized to buy the cheap UST and swap it for US$1.00 of LUNA, thereby reducing the supply of UST and pushing its price back up. Conversely, if UST rose above US$1.00, users could swap US$1.00 of LUNA for 1 UST, increasing the UST supply and lowering the price.

The defendants in this action were Terraform (the developer), Mr. Kwon (the co-founder and public face of the project), and LFG (a non-profit entity established to support the stability of the peg). The claimants were a group of retail and institutional investors who had purchased UST, often through the "Anchor Protocol." Anchor was a decentralized savings platform that offered a high, stable yield (approximately 20%) on UST deposits. To participate, users would deposit UST into Anchor and receive "aUST" tokens in return, which represented their share of the UST pool plus accrued interest. The claimants alleged that the defendants marketed the Terra ecosystem as "stable" and "safe," drawing comparisons to traditional savings accounts while omitting the inherent risks of the algorithmic peg.

The core of the dispute involved seven specific representations pleaded by the claimants. These included statements in the Terra White Paper, tweets by Mr. Kwon, and press releases from LFG. The claimants argued that these representations created a false impression of the protocol's resilience. For example, they pointed to claims that the "Terra protocol uses the basic market forces of supply and demand to maintain the price of Terra" (at [13]). They also relied on statements regarding the "LFG Reserve," which was purportedly a multi-billion dollar fund of Bitcoin and other assets intended to act as a "backstop" for the UST peg during periods of extreme volatility.

The "Terra-Luna crash" began on 7 May 2022. A series of large sell orders caused UST to deviate slightly from its peg. This triggered a "death spiral": as UST lost value, the protocol minted massive amounts of LUNA to absorb the sell pressure, which in turn hyper-inflated the supply of LUNA and crashed its price. This destroyed the value of the collateral backing the UST peg. By 13 May 2022, UST was trading at a fraction of a cent, and LUNA had lost 99.99% of its value. The representative claimants, led by Julian Moreno Beltran, alleged that they had been induced to stay in the ecosystem or buy more UST during the crash based on continued reassurances from the defendants, including a tweet from Mr. Kwon on 10 May 2022 promising a "return to form."

Procedurally, the case was complex. It was brought as a representative action under O 10 r 19 of the SICC Rules 2021. Earlier in the litigation, the defendants had sought to stay the proceedings in favor of arbitration, citing arbitration clauses in various website terms of use. This resulted in the decision in Beltran (Arbitration Stay) [2024] 4 SLR 674, where the court determined which claimants were bound by arbitration agreements. The remaining 356 claimants proceeded to trial in the SICC. The trial involved extensive evidence regarding the technical functioning of the Terra protocol, the nature of the Anchor Protocol, and the specific communications issued by the defendants during the de-pegging event.

What Were the Key Legal Issues?

The court was tasked with resolving several high-stakes legal questions that sit at the intersection of traditional contract law and the novel realities of decentralized finance. The primary issues can be categorized as follows:

• Actionability of Representations: Whether the seven pleaded representations were statements of present fact, or merely non-actionable statements of opinion, future intent, or "puffery." This required the application of the Misrepresentation Act 1967 and common law principles of deceit.
• Fraud and the Mental Element: Whether the defendants made the representations with knowledge of their falsity or with reckless indifference as to whether they were true or false. This was critical for the claim in the tort of deceit.
• Reliance and Inducement: Whether the representative claimants actually relied on the specific representations when making their investment decisions. The court had to determine if the representations were a "real and substantial" cause of the claimants' actions.
• Unilateral Contract Formation: Whether the defendants' public statements and the technical specifications of the Terra protocol constituted a unilateral offer to the world at large, which the claimants accepted by purchasing UST. This involved an analysis of whether there was an intention to create legal relations.
• Economic Torts: Whether the defendants engaged in an unlawful means conspiracy or induced a breach of contract between the claimants and the Anchor Protocol.
• Damages and Mitigation: If liability was established, what was the correct measure of damages? Specifically, should damages be assessed on an expectation basis (the value the tokens should have had) or a reliance basis (the actual loss suffered)? Furthermore, did the claimants fail to mitigate their losses by not selling their UST sooner during the crash?

The resolution of these issues required the court to interpret the Misrepresentation Act 1967 in the context of automated software protocols and to apply the "reasonable person" test to investors in the highly speculative cryptocurrency market.

How Did the Court Analyse the Issues?

The court’s analysis was exhaustive, spanning over 100 pages of reasoning. The centerpiece of the judgment was the evaluation of the seven pleaded representations. The court began by distinguishing between statements of future intent and statements of present fact, relying on the Court of Appeal's guidance in Tan Chin Seng and others v Raffles Town Club Pte Ltd [2003] 3 SLR(R) 307. The court noted that while "statements as to the future are not actionable as misrepresentations unless they are a valid contractual promise" (at [71]), a statement of future intent can imply a representation of present fact—namely, that the representor currently holds that intention and has a reasonable basis for it.

The Five Fraudulent Representations

The court found that five of the representations were fraudulent. These representations generally concerned the "self-healing" nature of the Terra protocol and the efficacy of the arbitrage mechanism. The court found that the defendants had represented the protocol as being capable of maintaining the peg through market forces alone, when in fact, the defendants knew (or were reckless as to the fact) that the mechanism was fundamentally fragile and dependent on continuous external demand that could not be guaranteed. The court applied the test from Derry v Peek, holding that the defendants made these statements either knowing they were false or without belief in their truth.

Specifically, the court analyzed the "Terra and Anchor representations." It held that by describing UST as a "stablecoin" and Anchor as a "savings" platform, the defendants represented that the system had a level of stability comparable to traditional financial instruments. The court found this to be a misrepresentation of the protocol's actual risk profile. The court also looked at the "LFG Reserve" representations, finding that the defendants had overstated the degree to which the reserve could and would be used to defend the peg. The court noted that the defendants' internal communications often contradicted their public reassurances, satisfying the "recklessness" standard for fraud.

The Non-Actionable Representations

Two of the representations were found to be non-actionable. These were characterized as either "mere puffery" or statements so vague that no reasonable investor would rely on them as a guarantee of fact. The court emphasized that in the volatile world of crypto, some degree of hyperbolic marketing is expected, and not every optimistic statement by a founder constitutes a legal representation. The court distinguished these from the technical descriptions of the arbitrage mechanism, which were presented as factual accounts of how the software functioned.

Unilateral Contract Analysis

The claimants’ argument for a unilateral contract was rejected. The court analyzed whether the Terra White Paper or the Anchor Protocol's documentation constituted an offer. Applying the objective test of contract formation, the court held that these documents were informational and technical in nature, rather than promissory. The court observed:

"no unilateral contracts were formed between the defendants and any representative claimant" (at [3]).

The court reasoned that if every technical specification in a software white paper were a contractual offer, the developers would be liable for every bug or market failure, which would be an absurd result in the absence of clear language indicating an intent to be legally bound. The court distinguished this from cases where a specific reward is offered for a specific act (like the classic Carlill v Carbolic Smoke Ball Co scenario).

Reliance and Causation

The court then turned to whether the claimants had actually relied on the five fraudulent representations. The court applied the principle from Panatron Pte Ltd and another v Lee Cheow Lee and another [2001] 2 SLR(R) 435, noting that a representee does not need to show that the misrepresentation was the sole cause of their action, only that it was a "real and substantial" inducement. For the representative claimants, the court examined their individual testimonies and investment histories. The court found that while some were sophisticated investors who relied on their own market analysis, others (like Mr. Davis) were significantly influenced by the defendants' reassurances of stability.

Damages and Mitigation

On the issue of damages, the court rejected the "expectation" measure. The claimants could not recover the "lost" value of the UST (i.e., the difference between the current price and US$1.00) as if the defendants had guaranteed that price. Instead, the court applied the "reliance" measure applicable to torts. This involved calculating the difference between the price paid for the UST and its actual value at the time of purchase, or the loss suffered by retaining the tokens due to the fraud.

Crucially, the court applied the doctrine of mitigation. The court held that once the "Terra-Luna crash" was in full swing and the falsity of the stability representations became obvious to any reasonable observer, the claimants were under a duty to mitigate their losses by exiting their positions. The court cited Broadley Construction Pte Ltd v Alacran Design Pte Ltd [2018] 2 SLR 110, affirming that while representees are not generally obliged to be suspicious, they cannot recover for losses incurred after they have actual or constructive knowledge of the fraud. This significantly limited the quantum of the awards.

What Was the Outcome?

The SICC delivered a mixed but significant outcome. The court's primary orders were as follows:

• Misrepresentation: The court found in favor of the representative claimants on five counts of fraudulent misrepresentation. It held that Terraform, Mr. Kwon, and LFG were liable for the losses suffered by those claimants who could demonstrate reliance on these specific statements.
• Contractual Claims: The claims for breach of unilateral contract were dismissed in their entirety. The court found no intention to create legal relations through the protocol's technical documentation.
• Tortious Claims: The claims for inducement of breach of contract and unlawful means conspiracy were dismissed. The court found no evidence that the defendants acted with the "predominant purpose" of injuring the claimants, as required by Quah Kay Tee v Ong and Co Pte Ltd [1996] 3 SLR(R) 637.
• Counterclaim: Terraform's counterclaim was partially successful. The court granted a declaration that the claimants were bound by the terms and conditions hyperlinked on the Terraform websites, which included relevant disclaimers and limitations of liability, though these did not insulate the defendants from liability for fraud.

Costs: Regarding the costs of the proceedings, the court ordered that:

"each party is to bear its own costs." (at [243]).

This reflected the fact that while the claimants succeeded on the fraud counts, they failed on several other major causes of action and the quantum of damages was significantly lower than originally sought.

Damages Award: The court awarded specific damages to the successful representative claimants. The operative paragraph regarding the primary award stated:

"I award US$5,983.12 to Mr Davis in damages for misrepresentation." (at [142] and [240]).

This amount was calculated based on the reliance measure, accounting for the initial investment and the point at which the claimant should have mitigated their loss.

The court also addressed the admissibility of evidence under the Evidence Act 1893, specifically s 32(1)(j)(iv), regarding the statements of witnesses who were non-compellable (at [63]). This was relevant for the testimony of Mr. Platias, whose evidence was admitted despite his absence from the jurisdiction.

Why Does This Case Matter?

This case is of paramount importance to the global legal landscape surrounding digital assets and decentralized finance. It is one of the first instances where a high-level commercial court has applied traditional principles of fraud and misrepresentation to the technical mechanics of an algorithmic stablecoin. The decision clarifies that the "decentralized" nature of a protocol does not provide a shield for its developers if they make fraudulent public statements about its stability or functioning.

For practitioners, the case establishes several critical precedents:

1. White Paper Liability: The judgment confirms that while white papers may not be contractual offers, they are "representations" for the purposes of the Misrepresentation Act 1967. Developers must ensure that technical descriptions of "stability mechanisms" are accurate and that the risks are not downplayed through hyperbolic marketing.
2. The Standard for Fraud in Crypto: The court's finding of "recklessness" as a basis for fraud is significant. It suggests that founders who promote complex financial products without a robust, good-faith belief in their underlying stability may be held liable for deceit. The court's willingness to look at internal communications to contradict public "reassurances" is a warning to the industry.
3. Representative Action Mechanics: The use of O 10 r 19 of the SICC Rules demonstrates the viability of representative actions for mass-claim crypto disputes in Singapore. It provides a blueprint for how hundreds of individual investors can seek redress in a single proceeding, provided there is a "common interest."
4. Damages and Mitigation in Volatile Markets: The court’s strict application of mitigation principles is a reality check for investors. It establishes that in a rapidly collapsing market, an investor cannot "sit on their hands" and expect to recover the full value of their loss if they had a reasonable opportunity to exit. This will be a key battleground in future crypto litigation.
5. Interplay with Arbitration: The case highlights the ongoing tension between court litigation and arbitration in the crypto space. The earlier Beltran (Arbitration Stay) decision and its application here show how carefully drafted website terms can split a claimant class between different forums.

In the broader Singapore legal landscape, this decision reinforces the SICC's position as a leading forum for complex, cross-border technology disputes. By applying established common law and statutory principles to novel assets, the court has provided much-needed legal certainty in an area often perceived as a "Wild West."

Practice Pointers

• Drafting Disclaimers: When advising crypto protocol developers, ensure that website terms and conditions are not just "hyperlinked" but are prominently displayed and require active "click-wrap" acceptance to maximize the chances of them being incorporated into the contract, as seen in the counterclaim analysis.
• White Paper Audits: Legal counsel should conduct "misrepresentation audits" of project white papers. Statements describing a protocol as "stable," "safe," or "guaranteed" should be qualified with clear, prominent risk disclosures that explain the conditions under which the protocol might fail.
• Proving Reliance in Representative Actions: For claimant counsel, it is not enough to show that the market was misled. You must lead specific evidence for the representative claimants showing how the representations entered their "decision-making matrix." The court in this case scrutinized individual testimonies closely.
• Mitigation Evidence: In de-pegging or "bank run" scenarios, defendants should gather data on market liquidity and the availability of exit ramps (exchanges) to argue that claimants failed to mitigate their losses by not selling earlier.
• Section 32 Evidence Act: Be prepared to use s 32 of the Evidence Act 1893 to admit statements from foreign developers or experts who are beyond the reach of a Singapore subpoena, provided the statutory conditions are met.
• Unilateral Contract Threshold: Avoid pleading unilateral contract unless there is clear evidence of a "promise for an act." The SICC has set a high bar for finding that technical documentation constitutes a contractual offer.

Subsequent Treatment

[None recorded in extracted metadata]

Legislation Referenced

• Misrepresentation Act 1967 (2020 Rev Ed)
• International Arbitration Act 1994 (2020 Rev Ed), s 6(1)
• Evidence Act 1893 (2020 Rev Ed), s 32(1)(j)(iv), s 32(3), s 13
• Singapore International Commercial Court Rules 2021, O 10 r 19, O 16 r 11, O 20 r 3, O 6 r 11, O 1 r 3

Cases Cited

• Applied:
  • Tan Chin Seng and others v Raffles Town Club Pte Ltd [2003] 3 SLR(R) 307
• Referred to:
  • Beltran, Julian Moreno and another v Terraform Labs Pte Ltd and others [2024] 4 SLR 674 (“Beltran (Arbitration Stay)”)
  • JIO Minerals FZC and others v Mineral Enterprises Ltd [2011] 1 SLR 391
  • Gimpex Ltd v Unity Holdings Business Ltd and others and another appeal [2015] 2 SLR 686
  • Anna Wee v Ng Hock Seng [2013] 3 SLR 801
  • Panatron Pte Ltd and another v Lee Cheow Lee and another [2001] 2 SLR(R) 435
  • Broadley Construction Pte Ltd v Alacran Design Pte Ltd [2018] 2 SLR 110
  • Axis Megalink Sdn Bhd and another v Far East Mining Pte Ltd [2024] 1 SLR 524
  • Quah Kay Tee v Ong and Co Pte Ltd [1996] 3 SLR(R) 637
  • Edgington v Fitzmaurice (1884) 29 ChD 459
  • Smith v Chadwick (1884) 9 AppCas 187

Source Documents

• Original judgment PDF: Download (PDF, hosted on Legal Wires CDN)
• Official eLitigation record: View on elitigation.sg