Terraform Labs, the firm behind the Terra/Luna collapse of 2022, is asking the United States Bankruptcy Court to serve FTX Trading Ltd. with subpoenas. Terraform believes that the fallen 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 caused the collapse of Terra/Luna tokens. The resulting domino effect wiped out $40 billion from the crypto markets.
The SEC Sued Terraform Labs in February
However, the firm claims that the depegging of Terra USD (UST) was ultimately not its fault. Instead, it happened because third parties deliberately attacked the stablecoin in a “short attack”—a coordinated attempt by investors or traders to drive down the price of a financial asset. In this case, Terra’s TerraUSD (UST) and Luna tokens.
Discover the shocking downfall of FTX in the most infamous collapse in cryptocurrency history: FTX Collapse Explained: How Sam Bankman-Fried’s Empire Fell
In order to prove the case, Terraform asks for FTX to release Jump Trading wallets showing its trades of UST and LUNA between May 1 and May 31, 2021, and May 1 and May 31, 2022. It also requests that FTX provide short sellers’ accounts and wallets from March 1 to May 31, 2022.
The court filing from Terraform Labs outlines several charges:
“Large UST holder(s) executed the short via multiple exchanges, wallets/accounts, and assets, including swapping Terra-native assets (UST, LUNA, MIR, mAssets, and ANC) for nonnative assets (BTC, USDT, USDC, etc.). The attack catalyzed massive asset withdrawals from protocol(s) developed by [Terraform Labs], and flooded FTX and other markets with sell/offer orders.
To establish these defenses, [Terraform Labs] needs Debtors’ records about wallets, accounts, and assets used to transact on the FTX International and US exchanges.… This evidence is in the Debtors’ possession, custody, and/or control.”
The Release 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 for its defense.
Not including their evidence would substantially harm its case, the firm claims. Terraform Lab’s trial with the SEC is due to begin on November 30.
The request for subpoenas comes the same week Terraform Labs revealed its new interim CEO.
Chris Amani, who previously jointly served as the company’s COO and CFO, has said he has the vision to turn the company around. However, in an interview with the Wall Street Journal this week, few details were forthcoming.
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