Terraform Labs Accuses Citadel Securities of Stablecoin Sabotage
Terraform Labs, the bankrupt Singaporean blockchain firm, is pointing fingers at American market maker Citadel Securities, alleging that it played a role in an orchestrated effort to destabilize Terraform’s TerraUSD (UST) stablecoin back in May 2022.
In its pursuit of justice, Terraform Labs has now called upon the United States District Court in the Southern District of Florida to compel Citadel Securities to furnish vital documents concerning their trading activities during that critical period, when the stablecoin underwent a depegging crisis, now referred to as TerraUSD Classic (USTC).
Allegations of intentional destabilization
That’s according to a motion filed by Terraform in the United States District Court in the Southern District of Florida, earlier this week. As alleged by Terraform Labs, the catastrophic depegging event in May 2022, which saw UST plummet from $1 to a mere $0.02, was not solely due to inherent instability in the algorithm supporting the UST stablecoin. Instead, the firm contends that it was a result of the deliberate and collaborative actions of specific third-party market participants who engaged in “shorting” to trigger the depegging.
Terraform stated in its motion:
“Movant [Terraform] contends that the market destabilization that occurred did not result from instability in the algorithm underlying the UST stablecoin. Instead, Movant contends that the market was destabilized due to the concerted, intentional effort of certain third party market participants to ‘short’ and cause UST to depeg from its one dollar price.”
The motion also alludes to “publicly available evidence” hinting at Citadel’s intention to short the stablecoin at the time of the depegging event. In particular, it references a Discord channel chat screenshot where a pseudonymous trader purportedly had a conversation with Citadel head Ken Griffin. Griffin allegedly remarked:
“They were going to Soros the f*** out of Luna UST,” seemingly drawing a connection to George Soros’ trading strategies, which often involve highly leveraged, one-way bets.
Citadel refuted allegations previously
Notably, Citadel Securities has previously refuted allegations of trading the TerraUSD stablecoin in May 2022, according to Forbes.
In its motion, Terraform refers to the importance of these documents for its defense in a lawsuit filed by the US Securities and Exchange Commission (SEC) in February. The SEC lawsuit alleges that Terraform Labs and its founder, Do Kwon, played a significant role in orchestrating a multi-billion dollar cryptocurrency securities fraud.
The motion concludes with Terraform arguing that its defense would be substantially hampered if Citadel Securities were to successfully withhold the requested information. In the event that the court fails to compel Citadel, Terraform has requested that the matter be transferred to the US District Court for the Southern District of New York.
The matter has been the subject of debate within the crypto community in recent months. In May a community member stated:
“As I’ve been saying. People blamed Citadel et al. This was nothing but a rug pull. Wake up. Do Kwon says the dissolving of Terraform Labs in Korea days before the $LUNA and $UST crash is ‘purely coincidental.’”
With the matter now being raised in the courts, it looks like the legal system will be the final adjudicator regarding the issue.
