JONATHAN KUPETZ & 9 Ors v TERRAFORM LABS PTE. LTD. & 2 Ors

1 The appellants were investors in TerraUSD (“UST”), an “algorithmic stablecoin” and sister cryptocurrency of the Luna token (“LUNA”). The respondents were developers of or entities associated with UST and LUNA. After the value of UST and LUNA collapsed, the appellants sued the respondents for, among other things, fraudulent misrepresentation. Before the trial, the respondents conceded that some of the alleged misrepresentations were fraudulently made (“Conceded Representations”).

2 The trial was bifurcated, with the first tranche dealing with issues common to all claimants, and disposing of the individual claims of ten representative claimants (now representative appellants) in full, and subsequent tranches addressing the claims of the remaining claimants (ie, the represented claimants, now represented appellants).

3 The Judge found that seven of the representative appellants had suffered loss in reliance on the Conceded Representations, but limited the assessment of damages to a cut-off date and cut-off time by which reliance on the Conceded Representations would have ended (“Cut-Off Date” and “Cut-Off Time” respectively).

4 In CA/CAS 2/2025 (“CAS 2”), the appellants appealed against what they characterised as the Judge’s finding on mitigation on the grounds that: (a) the respondents had not pleaded and particularised the appellants’ failure to mitigate prior to trial; (b) the Judge erred in applying the Cut-Off Time to all appellants, including the represented appellants; (c) the Judge erred in using the cut-off price of US$0.8011 (“Cut-Off Price”) for the purposes of a notional sale at the Cut-Off Time; (d) the Judge erred in the quantification of damages for four representative appellants, namely Mr Epstein, Mr Arun, Mr Tan and Mr Davis.

5 In CA/CAS 4/2025 (“CAS 4”), the appellants appealed against the Judge’s decision that the parties were to bear their own costs for the first tranche of the trial.

6 The appellants had brought a claim for damages which was grounded in their reliance on the Conceded Representation to purchase UST. It was appropriate to assess damages by taking the difference between the price at which the appellants purchased the UST and the benefits they received. In adopting this method, it was necessary to fix a date at which to calculate the value of the benefits received. The starting point in determining the cut-off date was the date when the misrepresentation ceased to be operative. It may be that after discovering the fraud, the claimant remained locked into the property due to circumstances outside his control. But if the claimant sought to recover damages for such losses, it was incumbent on them to plead and prove the cut-off date they sought to rely on: at [29], [32]–[33].

7 The foregoing analysis concerned causation of loss, which the claimant had to prove to make out its claim for damages. After the causal link was established, any avoidable loss arising from the claimant’s unreasonable inaction was not recoverable. The burden of proving that a claimant failed to mitigate was on the defendant. The link between causation and mitigation was that the duty to mitigate by selling the property generally only arose after the deceit was discovered; thereafter the reasonable standard in the form of the claimant taking reasonable steps to mitigate came into play. A claimant could not blame the defendant for failing to plead mitigation, in order to escape the consequences of their own failure to adequately prove causation of their loss: at [34], [37]–[38].

8 The Judge’s decision was not premised on the appellants’ failure to mitigate their loss, thus whether the respondents had sufficiently pleaded the failure to mitigate had no bearing on the merits of the appeal. It was open to a defendant to propose alternative cut-off dates by which time reliance on the misrepresentations must have ended. If the claimant took the view that the cut-off date had to be later, it fell on them to adduce the necessary evidence. The representative appellants decided not to do so, and could not complain on appeal that the respondents failed to sufficiently plead or give notice of their case: at [93], [95]–[96].

9 The Judge’s finding as to the Cut-Off Date and Cut-Off Time did not necessarily bind the represented claimants, although it bound the representative appellants: at [115], [119], [126].

10 The Judge did not err in finding that, on the available evidence, a reasonable investor considering the entirety of the 11 May 2022 tweets would have appreciated that UST’s value was not stable: at [131].

11 The Judge erred in adopting US$0.8011 as the Cut-Off Price. The Cut-Off Price might not realistically have reflected the price that an appellant, taking reasonable steps to sell by or at the Cut-Off Time, would have been able to obtain. The volatility in UST prices might also have rendered the selection of the Cut-Off Price based on the market price at the Cut-Off Time somewhat arbitrary and unrealistic. Furthermore, the appellants did not have an opportunity to address the Judge on whether they could realistically have sold their UST tokens at US$0.8011. Instead of remitting to the Judge, the more appropriate approach would be to adopt the price of US$0.60485 proposed by the first and third respondents at the trial below, which was a fair and appropriate price based on the available evidence, and a price which the appellants did not raise any objections to at the trial: at [140]–[143], [146], [148].

12 The Judge did not find that the Mr Epstein’s purchase of UST on 8 May 2022 was in reliance on the Seventh Representation. The Judge was justified in finding that that purchase was not based on his reliance on the Conceded Representations. Mr Epstein’s appeal against this finding was rejected: at [153], [154], [159].

13 The Judge was entitled to find that Mr Arun had taken over the Binance account he created for his sister. The damages awarded to him should be revised to account for his UST holdings in both his Coinbase and Binance accounts: at [162].

14 Given the dismissal of SUM 29, there was no basis to disturb the damages awarded to Mr Davis and Mr Tan: at [164].

15 The appellants were the successful party in the first tranche of the trial, having obtained judgment for a significant sum. Considering that they failed in respect of most live issues, they should only be awarded 20% of their claimed costs and disbursements. The appellants’ costs were otherwise reasonable and proportionate: at [172], [174]–[175].