Terraform Labs, the blockchain company founded by Do Kwon, is once again pointing the finger at market maker Citadel Securities for its alleged involvement in the collapse of its TerraUSD (UST) stablecoin. The company has filed a motion in the United States District Court in the Southern District of Florida to compel Citadel Securities to produce documents related to its trading activities during that time.
Terraform Labs contends that the de-pegging of TerraUSD, which saw the stablecoin’s value plummet from $1 to $0.02, was not due to instability in its underlying algorithm but rather a result of a “concerted, intentional effort” by certain third-party market participants to short the stablecoin and cause it to depeg. The company argues that the market destabilization was not a natural occurrence but was engineered by external actors.
The motion filed by Terraform Labs cites “publicly available evidence” suggesting that Ken Griffin, the head of Citadel Securities, had the intention to short TerraUSD around the time of the depeg. A screenshot from a Discord chat was included in the filing, in which a pseudonymous trader claimed to have had a conversation with Griffin, who allegedly expressed the intent to “Soros the f*** out of Luna UST.” This statement is believed to refer to the trading strategies of George Soros, which often involve highly leveraged, one-way bets.
Citadel Securities, however, has previously denied trading TerraUSD, as reported by Forbes. The market maker has not yet responded to requests for additional comment regarding the recent motion.
The crypto industry’s stakes in Terraform labs’ legal battle
Terraform Labs argues that the documents it seeks from Citadel Securities are crucial for its defense in a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in February. The SEC’s lawsuit alleges that Terraform Labs and its founder, Do Kwon, were involved in “orchestrating a multi-billion dollar crypto asset securities fraud.” Terraform Labs insists that its defense will be significantly impaired if Citadel Securities is allowed to withhold this information.
If the court refuses to compel Citadel Securities to produce the trading documents, Terraform has requested that the matter be transferred to the U.S. District Court for the Southern District of New York for a decision by Judge Jed Rakoff. This move could potentially shift the course of the legal proceedings and determine the outcome of the case.
This is not the first time Terraform Labs has sought external data to support its defense. The company sought permission from a judge to subpoena data from the now-bankrupt crypto exchange FTX, with the claim that this information could be instrumental in their legal defense strategy. Terraform Labs seems determined to gather any relevant evidence to support its position in the ongoing legal battle.
Terraform Labs’ allegations of market manipulation and its pursuit of trading data from Citadel Securities add further complexity to the legal dispute with the SEC. The outcome of this case will have implications not only for Terraform Labs and Do Kwon but also for the wider cryptocurrency and blockchain industry.
