Terraform Labs has taken legal action in an attempt to obtain trading data from Citadel Securities, alleging the market maker’s involvement in the depegging of its stablecoin, now known as TerraUSD Classic (USTC), in May 2022.
Motion to Compel Citadel’s Documents
On October 10, Terraform Labs filed a motion in the United States District Court in the Southern District of Florida, seeking to compel Citadel Securities LLC to disclose documents related to its trading activities in May 2022 when USTC depegged.
Screenshot from filing from Terraform compelling Citadel to provide additional documents. Source: courtlistener
Terraform contends that the depegging, during which USTC plummeted from $1 to $0.02, resulted from the intentional shorting of the stablecoin by specific third-party market participants, rather than instability in its algorithm.
The motion cites “publicly available evidence” suggesting Citadel’s head, Ken Griffin, had an intention to short the stablecoin around the depegging event.
Implications for Ongoing Lawsuit
Terraform Labs is facing a lawsuit by the U.S. Securities and Exchange Commission, alleging that the company and its founder, Do Kwon, were involved in a “multi-billion dollar crypto asset securities fraud.” Terraform argues that access to Citadel Securities’ trading documents is crucial for its defense in the lawsuit.
If the court does not compel Citadel to produce the requested documents, Terraform has requested that the case be transferred to the U.S. District Court for the Southern District of New York for a decision by Judge Rakoff. Terraform Labs had previously sought permission to subpoena data from the bankrupt crypto exchange FTX in July, citing its potential relevance to their defense.