TerraForm Labs Alleges Citadel Securities Had A Hand In UST Depeg

TerraForm Labs Alleges Citadel Securities Had A Hand In UST Depeg

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Do Kwon-founded Terraform Labs has once again blamed market maker Citadel Securities for its role in an alleged international effort to cause the depegging of its TerraUSD (UST) stablecoin. 

Terraform has sought several documents, which it alleges will prove the market maker was involved with the UST depeg. 

Terraform Labs Allegations Against Citadel 

Terra's Do Kwon Shares Thoughts Amid Crypto Market Bloodbath

In line with its allegations against Citadel, Terraform Labs filed a motion to compel Citadel Securities to produce certain data responsive to a third-party subpoena. The motion was filed in the United States District Court in the Southern District of Florida. The motion to compel states that Citadel Securities must produce documents related to its trading activities in May 2022. This was the same time the UST stablecoin lost its peg. 

Terraform argues in its motion that the documents are crucial for its defense in the lawsuit filed against it by the United States Securities and Exchange Commission (SEC). The lawsuit filed by the SEC alleges that Terraform Labs and its founder, Do Kwon, orchestrated a multi-billion dollar crypto asset securities fraud. 

The motion also says that the company had served subpoenas to both Citadel Securities and Citadel Enterprise Americas. The motion contends that the May 2022 depeg of UST, when the stablecoin went from $1 to $0.02, was caused by third-party participants who intentionally shorted the stablecoin. 

“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.”

Citadel Connected With Depeg 

Citadel Securities - Next-Generation Capital Markets Firm

Terraform has also pointed to publicly available evidence suggesting that the Founder of Citadel Entities, Ken Griffin, planned to short UST when the stablecoin lost its peg. 

“There is publicly available evidence suggesting that the head of the Citadel Entities, Ken Griffin, intended to short UST at or about the time of the May 2022 depeg.”

Terraform also claims to have evidence that Citadel Securities may be connected to the depeg. This is despite Citadel Securities denying the fact that it traded UST during the depeg event. 

“The information that [Terraform] seeks here from Citadel Securities is limited: documents describing any trading strategy in any of the Terra-Native Tokens or the Terra Financial Instruments during the time period March 1, 2022 through May 31, 2022.”

Citadel Issues Denial 

Citadel has already previously denied rumors tying it to the UST depeg. According to a post on X back in May 2022, Citadel stated it does not trade stablecoin, including UST. 

“Citadel has shot down rumors that it was involved in the depegging of Terra and the $LUNA price collapse. “Citadel Securities does not trade stablecoins, including UST.”

In response to the initial subpoenas, Citadel told Terraform it does not have any trading in the Terra Financial Instruments or Terra-native tokens. As such, it added that it also did not have any responsive documents. 

“Citadel has no trading in the Terra Financial Instruments or the Terra-Native Tokens and, therefore, has no responsive documents. This frivolous motion is based on false social media posts and ignores information we already provided, confirming we had no role whatsoever in this matter.”

Suppose the presiding judge refuses to compel Citadel to produce the relevant documents. In that case, Terraform has requested the matter to be transferred to the US District Court for the Southern District of New York for a decision by Judge Jed Rakoff.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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