FatMan Terra, the Terra Chain’s “Man of the People”, shared his latest insights about the hottest crypto story at the moment – UST.

FatMan Terra said on Twitter that Stablegains is “in deep trouble” as it lost $42 million in funds from nearly 5,000 customers with almost no chance to pay it back.

He noted that Stablegains received both USDC and USD from customers with a promise of a yield of 15%. According to FatMan, the project has now changed the denominations in their app from USD to UST.

Lawsuits Filed Against Do Kwon

He also shared a series of tweets where people from around the world are threatening to sue Do Kwon, the founder of Terraform Labs.

For instance, Erickson Kramer Osborne – a San Francisco Bay Area law firm – has requested Stablegains to “control preserve and maintain” records of customers’ accounts, records about the marketing of products and services, and all internal and external communications regarding Terra stablecoins.

It also warned that the failure to comply with these demands “may result in civil or criminal penalties.”

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Cryptoassets are a highly volatile unregulated investment product.

What Happened to UST?

TerraUSD (UST), a cryptocurrency stablecoin meant to mirror the value of the US dollar, lost almost 99% of its value following the huge market crash on May 10.

Prior to the crash, TerraUSD was among the top 10 most valuable cryptocurrencies with a market value of over $40 million, with that figure plummeting to just $500 million in a matter of days.

Unlike other stablecoins, TerraUSD, or UST, isn’t backed by real US dollars. Instead, UST is supported by a related coin called Luna, both operated by Terraform Labs. This setup lets investors exchange one UST for one Luna, and the other way around—meaning that selling one coin should equal the value of the other.

So Why Did TerraUSD Drop?

Roughly 75% of TerraUSD’s circulating supply was in the Anchor lending protocol and investors who purchased UST were promised 20% yields on their investments. In other words, traders were depositing funds with Stablegains, which then converted them to UST and deposited with the Anchor protocol, bringing investors substantial yields.

However, investors soon realized that such yields do not last forever so they started offloading the coin, and as a result, the balance between the two sister coins was unsettled.

After UST broke its peg to the US dollar, Luna price cratered from $85 to $0.04 in just several days.

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Cryptoassets are a highly volatile unregulated investment product.