Terraform Labs expects FTX Trading Ltd. to receive subpoenas in connection with an ongoing court case from the SEC, which sued Terraform and its former CEO in February for alleged fraud that led to the Terra/Luna token collapse.
Terraform Labs, the firm behind the 2022 Terra/Luna crash, is asking the US Bankruptcy Court to serve subpoenas on FTX Trading Ltd. Terraform believes the downed exchange possesses documents relevant to its own court battle with the Securities and Exchange Commission (SEC).
Gary Gensler’s SEC has set its sights on Terraform Labs and former CEO, Do Kwon. The agency accuses them of engaging in fraudulent activities and market manipulation that ultimately led to the collapse of the Terra/Luna tokens. The resulting domino effect wiped $40 billion out of the crypto markets.
SEC Sued Terraform Labs in February
However, the firm claims that the decoupling of Terra USD (UST) was ultimately not its fault. Instead, it happened because third parties deliberately attacked the stablecoin in a “short hack,” a coordinated attempt by investors or traders to lower the price of a financial asset. In this case, the TerraUSD (UST) and Luna de Terra tokens.
To prove the case, Terraform Labs requests FTX to release Jump Trading wallets displaying its UST and LUNA trades between May 1-31, 2021 and May 1-31, 2022. It also requests that FTX provide short seller accounts and wallets from March 1 to May 31, 2022.
Terraform Labs’ court filing outlines several charges:
“Large holders of UST executed the short across multiple exchanges, wallets/accounts, and assets, including trading native Terra assets (UST, LUNA, MIR, mAssets, and ANC) for non-native assets (BTC, USDT, USDC, etc.). The hack catalyzed massive asset withdrawals from the protocols developed by [Terraform Labs] and flooded FTX and other markets with sell/offer orders.”
The text continues as follows:
“To establish these defenses, [Terraform Labs] needs the Debtors’ records of wallets, accounts, and assets used to transact on the FTX International and US exchanges and sales/offers of large volumes of cryptocurrencies developed by TFL, if any, by FTX Trading and West Realm Shires Services Inc. d/b/a FTX US. This evidence is in the Debtors’ possession, custody, and/or control.”
As it may be recalled, on February 16, the SEC filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion-dollar crypto asset fraud.” According to the regulator, Terraform Labs was offering unregistered securities in the form of its failed algorithmic stablecoin TerraUSD (UST) and the Terra Luna (LUNA) token. Terraforms’ bankruptcy in 2022 caused a loss of more than $40 billion in the cryptocurrency markets.
Publication of the Documents is Crucial, Argues Terraform
According to the court filing, Terraform Labs says it believes there is good cause to grant the requested relief, as the information is vital to its defense. Not including your evidence would substantially damage your case, the firm claims. Terraform Lab’s trial with the SEC will begin on November 30. The subpoena request comes the same week that Terraform Labs revealed its new interim CEO.
Chris Amani, who previously served jointly as the company’s chief operating officer and chief financial officer, has said he has a vision to turn the company around. However, in an interview with the Wall Street Journal this week, few details were given.
By Audy Castaneda
