Terraform Labs, founded by Do Kwon, has once again accused market maker Citadel Securities of playing a role in intentionally causing its TerraUSD (UST) stablecoin to depeg in 2022. In a motion filed on October 10 in the U.S. District Court for the Southern District of Florida, Terraform Labs requested that Citadel Securities provide documents related to its trading practices in May 2022 when its stablecoin, now known as TerraUSD Classic (USTC), decoupled. Terraform Labs believes that the decoupling was a result of "concerted and intentional efforts" by third-party market participants who deliberately shorted the stablecoin rather than instability in its algorithm.
The motion points out that public evidence suggests Citadel's head, Ken Griffin, intended to short stablecoins during the decoupling. Screenshots of a Discord channel chat are mentioned in the document, where an anonymous trader claimed to have had lunch with Griffin, who allegedly made a statement regarding shorting UST upon decoupling in May 2022. However, Citadel Securities had previously denied trading the TerraUSD stablecoin during that period.
Terraform emphasized the importance of the requested documents in its defense against an SEC lawsuit filed in February, which accused Terraform Labs and its founder Do Kwon of participating in "orchestrating billions of dollars in transactions" related to crypto asset securities fraud. The company argued that if Citadel Securities succeeded in concealing this information, it would seriously compromise its defense.
Should the court not compel Citadel to provide the transaction documents, Terraform has requested that the matter be moved to the U.S. District Court for the Southern District of New York for a ruling by Judge Jed Rakoff. In a separate incident in July, Terraform Labs sought permission to subpoena data from the bankrupt cryptocurrency exchange FTX, believing that the information could be beneficial to its defense.
