Terraform Labs Accuses Citadel Securities For Destabilising UST

On Oct 13, 2023

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Do Kwon’s Terraform Labs is again suggesting that Citadel Securities played a pivotal role in the crash of its TerraUSD (UST) stablecoin in May 2022.

In an Oct. 11 filing, Terraform seeks to compel Citadel to provide key trading data linked to UST’s collapse last year, when its value plunged to $0.02 from $1.

Terraform argues that its stablecoin was intentionally destabilized by key market participants who triggered the de-pegging event from its $1 price.

The motion says that there was “publicly available evidence” that indicates that Citadel CEO Ken Griffin intended to short UST around the time of the implosion.

It included a screenshot from a Discord channel of a chat in which Griffin had lunch with a trader using a pseudonym who is reported to have said, “They were going to Soros the f*** out of Luna UST.” Hedge fund legend George Soros was renowned for his shorting strategies.

“[Terraform] 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,” it said. “The market destabilization that occurred did not result from instability in the algorithm underlying the UST stablecoin.”

Terraform says Citadel’s trading data is crucial for its defense in a case brought against it by the US Securities and Exchange Commission (SEC).

That lawsuit alleges that Do Kwon was involved in ”orchestrating a multi-billion dollar crypto asset securities fraud.”

“This defence will be substantially impaired if Citadel Securities is successful in witholding this limited information,” it said

Will Citadel Cooperate With Terraform?

All eyes are now focused on Citadel’s response to the lawsuit. It denied any involvement in trading Terraform’s UST in May last year.

In a call with @Blockworks_ , 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,” a spokesman told us.@citsecurities $UST
— Dan Keeler (@dankeeler) May 11, 2022

The SEC is seeking to prove that Terraform and Do Kwon have a case to answer for their actions in one of the crypto industry’s biggest collapses.

Before the crash in May 2022, the Terra Network was one of the fastest-growing crypto ecosystems with a market cap of $18 billion. It operated TerraUSD (USD), an algorithmic stablecoin, and LUNA, a companion digital token.

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