Terraform Labs Seeks Citadel Securities’ Trading Data amid SEC Lawsuit

Terraform Labs Pte. Ltd. (Movant), has filed a motion to compel market maker Citadel Securities, LLC to divulge crucial trading data. This data, pertinent to a third-party subpoena, is deemed critical for Terraform Labs’ defense against a lawsuit initiated by the U.S. Securities and Exchange Commission (SEC). The lawsuit, presided over by the U.S. District Court for the Southern District of New York, delves into allegations of market destabilization due to purported intentional actions by certain market players to “short” and consequently cause the TerraUSD (UST) stablecoin to depeg from its $1 benchmark.

Disputing the SEC’s allegations, Terraform Labs argues that the market instability did not stem from the algorithm underpinning UST but was a result of orchestrated efforts by third-party market participants to manipulate the stablecoin’s value. The significant focus is on the trading activities around the May 2022 Depeg event, during which UST lost its peg to the dollar, crashing from $1 to $0.02. In light of this, Terraform Labs significantly narrowed down its subpoena requests, centering on the most critical trading data pertinent to this event.

Citadel Securities’ response was to provide a single document under the ongoing Confidentiality Order while refusing any further cooperation. The document in question pertains to trading strategies involving Terra-Native Tokens or Terra Financial Instruments between March 1, 2022, and May 31, 2022. Terraform Labs believes that unearthing this data is pivotal to understanding the May 2022 Depeg’s dynamics, examining Citadel Securities’ involvement, and whether there was a coordinated endeavor to short UST.

The motion filed accentuates the necessity for Citadel Securities to disclose the limited trading strategy information, urging the court to either grant this motion or transfer the matter to Hon. Jed S. Rakoff, the presiding judge in the Underlying Action. This motion trails an array of subpoenas issued to various market players, including Citadel Entities controlled by renowned short seller, Ken Griffin.

The crux of the matter extends to allegations by the SEC that Terraform Labs, spearheaded by founder Do Kwon, engaged in a multi-billion dollar crypto asset securities fraud. The SEC criticizes Terraform Labs for purported misrepresentations regarding the stability of UST and the effectiveness of its algorithm in maintaining the $1 price peg.

In a secondary narrative, the motion reveals discord chats hinting at Ken Griffin’s intention to short UST around May 2022, amplifying the discord between Terraform Labs and Citadel Securities. Despite Citadel Securities’ denial of trading TerraUSD in May 2022, as reported by Forbes, Terraform Labs persists in asserting that the requested documents are indispensable for a robust defense.

In a bid to expedite a favorable resolution, Terraform Labs has proposed transferring this matter to the U.S. District Court for the Southern District of New York if the court declines to compel Citadel Securities. The ongoing litigation underscores the nuanced and complex nature of cryptocurrency-related cases, shedding light on the potential manipulative practices within digital asset markets.

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Billionaire Ken Griffin slams crypto as ‘jihadist call’ against the greenback

Hedge fund billionaire Ken Griffin and former U.S. President Donald Trump have both slammed digital currencies as a threat to the U.S. dollar.

Griffin, the founder of the $38 billion hedge fund Citadel LLC, told the Economic Club of Chicago on Oct. 4, that crypto is “a jihadist call that we don’t believe in the dollar.”  He expressed his dismay over the younger generation working on dollar alternatives in the crypto sector:

“What a crazy concept this is, that we as a country embrace so many bright, young, talented people to come up with a replacement for our reserve currency.”

“I wish all this passion and energy that went to crypto was directed towards making the United States stronger,” he added.

Griffin however doesn’t not seem opposed to making money out of crypto in the future. He said that Citadel is yet to follow the plunge of other hedge funds and traditional financial institutions into crypto because of the “lack of regulatory certainty.”

The hedge fund manager said that U.S. Securities and Exchange Commission Chairman Gary Gensler was “spot on” in his comments from August, when he said that if crypto is going to achieve its potential it “needs to come within public policy frameworks.”

“Doing so will make it a smaller market, because it’ll become a far more competitive market when there’s regulatory clarity,” Griffin said. “And that will be good. A small market, less people involved who are frankly just trying to make a quick buck.”

Meanwhile former US President Donald Trump warned against the threat to the dollar from China’s digital yuan.

During an interview with Yahoo Finance’s Adam Shapiro on Oct. 5, Trump provided his take on China, the U.S. economy and the crypto sector.

Speaking on the Chinese government’s moves to ban crypto in the country led by Xi Jinping, Trump said the clampdown was a part of Jinping’s moves to squash competition as he works on “his own currency, whether it’s crypto or otherwise,” and suggested that the U.S. government should do the same:

“I’m a big fan of our currency and I don’t want to have other currencies coming out and hurting or demeaning the dollar in any way.”

“If you look at a monetary system based on the dollar, if you start losing credibility, all of a sudden you’re going to lose that strong monetary system,” Trump said. The controversial former president said the U.S. government’s “horror show” with the Mexican border and pull back from Afghanistan had also affected the credibility of the greenback.

Trump is also no fan of cryptocurrency. In late August, he stated that crypto was “potentially a disaster waiting to happen” as he questioned whether digital assets were “fake”:

“They [cryptocurrencies] may be fake. Who knows what they are? They are certainly something that people don’t know very much about.”