It's actually held on chain, and it's noncustodial, so it's actually as secure as they get. People don't like it because when you pay a LN invoice, it actually sends an onchain transaction to Muun headquarters and they pay the LN invoice. It means it's kinda not "no trusted intermediaries." I worry if they can keep that up if fees rise though. Back before lightning network, they were like 50$ a onchain transaction.