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Singapore Court of Appeal clarifies assessment of fraud damages in a falling market

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Singapore Client Update                                                                                     JULY 2026

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© RAJAH & TANN SINGAPORE LLP
BANKING & FINANCIAL DISPUTES
Singapore Court of Appeal Clarifies
Assessment of Fraud Damages in a Falling
Market
Introduction

In Kupetz, Jonathan and others v Terraform Labs Pte Ltd and others [2026] SGCA(I) 1, the Singapore
Court of Appeal clarified how damages for fraud should be assessed where an asset that is acquired in reliance on the fraud collapses in value in a falling market. The decision highlights the importance of identifying when the fraud ceases to be operative, after which any loss suffered by the buyer may be attributed to his own decision to hold on to the asset instead of to the fraud.

Background Facts

The claimants were representative claimants who had invested in TerraUSD, or UST, an algorithmic stablecoin. The defendants were developers of or entities associated with UST. The claimants claimed that the defendants had made misrepresentations about UST's stability, including as to how robustly
UST would be pegged to the US dollar. When UST later de-pegged from the US dollar, its value collapsed, and the claimants suffered investment losses. The defendants conceded before trial that they had made false and fraudulent representations, but did not admit reliance, causation or loss.

The trial judge found that seven of the ten representative claimants had relied on the misrepresentations and suffered loss. The trial judge then determined that by a certain time which was referred to as the
"Cut Off Time", it would have been apparent that the representations were not true, so the claimants'
reliance on the representations would have ended. He awarded the seven claimants the difference between the price at which they had invested in UST, and the value of the UST they held based on the opening price at the Cut-Off Time, which was referred to as the "Cut Off Price". The total award of damages was around US$451,000, a fraction of the total amount claimed.

The claimants appealed. They challenged the trial judge's approach to the Cut-Off Time and the Cut-Off Price as a finding on whether the claimants had mitigated their loss, which they argued the defendants had not properly pleaded. They also argued that the trial judge had erred in applying the
Cut-Off Time to all the representative claimants, and in using the Cut-Off Price for the purposes of a notional sale at the Cut-Off Time.

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Causation or Mitigation?

The Court of Appeal held that the trial judge's analysis was properly one of causation, and not mitigation as the claimants had argued.

The Court re-affirmed the general principle that where a claimant has been fraudulently induced to buy an asset, he may recover the purchase price less the value of the benefits received. But those benefits must be valued as at a certain date. The Court held that the starting point in determining this date is the date the misrepresentation ceases to be operative—that is, when the fraud was discovered. Once the fraud is discovered, if the claimant exercises a free choice to hold on to the acquired asset, the chain of causation is broken and any further losses are no longer regarded as caused by the fraud. However, if the claimant remains locked into the property due to circumstances beyond his control, such that she cannot be said to have been a free and informed decision to hold on, further losses may still be causally attributed to the defendant. The issue of mitigation may then arise, but only after the claimant has established the causal link between the fraud and the loss.

This is an important clarification. In claims of this nature, defendants often argue that claimants held on to the relevant assets too long, so their losses should not fall on the defendants. Claimants may answer that their losses would not have arisen had they not been induced to invest in the first place. They may also contend that they sought reasonably to mitigate their loss by waiting for the market to bounce back.
The Court of Appeal's decision makes it clear that notwithstanding such arguments, the burden remains on the claimant to establish when the fraud operated—and ceased to operate—on the claimant's mind and, in turn, what loss was caused by the fraud.