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Citadel Securities Faces Allegations from Terraform Labs over TerraUSD Crash

Citadel Securities Faces Allegations from Terraform Labs over TerraUSD Crash

Terraform Labs claims Citadel Securities played a role in its stablecoin depegging.

Terraform Labs is once again leveling allegations against market-making firm Citadel Securities. The company argues that Citadel participated in a "concerted, intentional effort" to deliberately devalue its TerraUSD (UST) stablecoin last year.

On October 10, Terraform Labs submitted a motion to the US District Court in the Southern District of Florida. The motion seeks to force Citadel Securities to release documents tied to its trading activities in May 2022, when TerraUSD plummeted in value from $1 to just $0.02.

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Terraform Labs challenges the notion that the asset's depeg was due to algorithmic instability. The firm maintains that "certain third-party market participants" aimed to short the stablecoin, thus causing its sharp decline.

The motion also referenced public evidence suggesting that Citadel's head, Ken Griffin, intended to short the stablecoin during the same timeframe.

A screenshot from a Discord chat mentioned a trader's lunch meeting with Griffin, where he allegedly stated that they would "Soros the f*** out of Luna UST," alluding to the high-risk trading strategies used by George Soros.

The motion read:

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.

For its part, Citadel Securities had previously told Forbes that it did not trade the TerraUSD stablecoin in May 2022.

The documents that Terraform Labs seeks from Citadel are vital for its ongoing legal defense against the lawsuit initiated by the US Securities and Exchange Commission (SEC) in February. The SEC accuses Terraform Labs and Do Kwon of "orchestrating a multi-billion dollar crypto asset securities fraud."

Terraform Labs claimed in its motion:

This defense will be substantially impaired if Citadel Securities is successful in withholding this limited information.

Should the court deny Terraform's request for Citadel to produce the trading records, the company has asked that the issue be transferred to the US District Court for the Southern District of New York for further adjudication by Judge Jed Rakoff.

Terraform Labs' recent motion adds a new layer of complexity to its legal challenges, bringing Citadel Securities into the fray. The case, already closely monitored by the crypto community, promises to reveal more as the legal proceedings unfold.

Aaron S. , Editor-In-Chief
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.
With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.
Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.
Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.

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