Terraform Labs Seeks Subpoena of FTX Data to Strengthen SEC Defense
Lawyers representing Terraform said a “coordinated short attack” caused the stablecoin to falter and that those sellers likely used FTX to, in part, conduct that attack, in a court document filed on Wednesday.
Because Bitcoin
July 20, 2023
The Block reported that Terraform Labs is seeking court approval to subpoena specific information related to accounts, wallets, and assets from the bankrupt exchange FTX. The purpose of this request is to defend itself in a case brought by the Securities and Exchange Commission (SEC). The SEC had charged Terraform and its former CEO Do Kwon in February, accusing them of misleading investors regarding their algorithmic stablecoin, TerraUSD.
Terraform's lawyers argue that a "coordinated short attack" led to the instability of the stablecoin, and they suspect that FTX may have been used by the sellers to conduct this attack. In a motion filed in the U.S. Bankruptcy Court for the District of Delaware involving FTX, the lawyers stress that obtaining these records is critical for Terraform's defense in the SEC case. The information is needed for crucial blockchain analysis of the short-sellers' trading and market activity to counter the SEC's allegations, among other essential aspects of their defense.
Terraform Labs and its former CEO, Kwon, are under scrutiny by the SEC for allegedly misleading investors regarding the stability of the TerraUSD stablecoin. The SEC's claims include accusations that Terraform and Kwon provided false information during a depegging incident in May 2021, falsely attributing the restoration of the stablecoin's value to an algorithm when, in reality, they sought assistance from Jump Trading to support it.
Terraform denies that Jump Trading was responsible for the peg restoration in 2021, as stated in the motion filed recently.
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