Terraform Labs, the company behind Terra, requested the court to grant permission to serve subpoenas to bankrupt crypto exchange FTX and its related entities.
In a motion filed on July 19, lawyers for Terraform Labs argued that records about wallets, accounts and assets used to transact on FTX and its U.S. subsidiary FTX.US would be crucial to the firm’s defense against ongoing legal action from the U.S. Securities and Exchange Commission (SEC).
One of the SEC’s claims is that Terra falsely represented the “mint/burn” mechanism of its algorithmic stablecoin TerraUSD (UST) and its ability to withstand market forces in the event of a depeg. Specifically, the SEC alleged that Terra had entered a special agreement with trading firm Jump Trading to recover UST when it briefly depegged in May 2021.
Terra disputed these allegations and further contended that the collapse of UST a year later was the result of a “coordinated short attack” by third parties. The firm claims that large UST holders executed these shorts by swapping Terra-native assets like UST, LUNA, MIR, mAssets and ANC for other assets like BTC, USDT and USDC.
“The attack catalyzed massive asset withdrawals from protocol(s) developed by TFL, and flooded FTX and other markets with sell/offer orders,” stated Terraform Labs in the motion.
The firm claims that the evidence is in FTX’s possession and is seeking information about wallets used by Jump Trading to trade UST and LUNA on the exchange between May 2021 and May 2022, and other short sellers between January 2018 and the present day.
Terraform Labs’ new CEO Chris Amani filed a supporting motion backing these claims.
“Publicly available blockchain data also shows that wallets identified as involved in the attack transferred the proceeds of their sales of UST to FTX exchange deposit wallets,” stated Amani.
The firm requested the court to grant immediate release of these documents should the request for a subpoena be granted. The trial between Terraform Labs and the SEC is expected to take place after November 30.