Terraform Labs Points Finger at Citadel Securities in Shocking Stablecoin Collapse

In a recent legal development, Terraform Labs is making a determined push to access trading data from Citadel Securities. The firm believes that this data holds crucial evidence about Citadel’s role in the collapse of USTC in May 2022.

Terraform Labs, led by founder Do Kwon, has once again accused Citadel Securities of being part of an alleged deliberate effort to depeg TerraUSD Classic (USTC) in 2022.

Terraform Labs filed a motion on October 10 in the United States District Court in the Southern District of Florida. The motion requests Citadel Securities LLC to provide documents related to their trading activities in May 2022, particularly during the time when USTC’s value depegged.

The motion argues that the USTC’s depeg in May 2022, which saw its value plummet from $1 to $0.02, was not due to algorithmic instability but rather the result of specific third-party market participants intentionally shorting the stablecoin.

Terraform Labs states that the market destabilization was not a natural occurrence but a concerted and intentional effort by certain market participants to “short” USTC, causing it to depeg from its one-dollar value.

The motion also cites publicly available evidence suggesting that Ken Griffin, the head of Citadel Securities, had the intention to short USTC during the same period. A Discord chat screenshot is referenced, where a pseudonymous trader claimed Griffin was planning to “short” USTC.

Citadel Securities has previously denied trading TerraUSD stablecoin in May 2022, as reported by Forbes.

Terraform Labs’ legal motion emphasizes the importance of these documents for its defense against 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, played a significant role in orchestrating a multi-billion dollar crypto asset securities fraud.

Terraform Labs underlines that its defense will be severely hampered if Citadel Securities successfully withholds this vital information.

In the event that the court refuses to compel Citadel to produce the trading documents, Terraform Labs has requested transferring the matter to the U.S. District Court for the Southern District of New York for a decision by Judge Rakoff.

In July, Terraform Labs had sought permission to subpoena data from the bankrupt crypto exchange FTX, with the claim that this information could further support its defense.