Terraform targets Citadel Securities alleging potential connection to UST depeg

Terraform Labs filed for a motion to compel Citadel Securities to “produce certain data responsive to a third-party subpoena” which it argues is “vital” to its defense in the US Securities and Exchange Commission’s lawsuit against the company and its former CEO, Do Kwon.

The motion to compel says that the company served subpoenas to both Citadel Securities and Citadel Enterprise Americas, specifically targeting trading data “related to the May 2022 Depeg.”

“[Terraform] has pointed to 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. 

Moreover, as also set forth below, Movant has now obtained evidence suggesting one Citadel Securities may actually have had a connection to the May 2022 Depeg — despite the fact that Citadel Securities publicly denied ever having traded in UST during that depeg event.”

They claim that a document — though it’s unclear what type of document — was produced.

“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,” it said.

Terraform says that Nansen data helped point them to “seven so-called ‘whale’ traders — well-funded, established traders which have the ability and determination to take very long or short positions in an asset or financial instrument.”

Further, the data also “revealed that a small number of players identified vulnerabilities early into the UST de-peg.”

Read more: Not so Tangible? Real USD stablecoin turns illiquid

Terraform clarified that it issued subpoenas to “certain market participants,” with two going to the aforementioned Citadel Entities. 

The firm cited a Discord chat screenshot in the filing showing an anonymous trader who claimed to have had lunch with Citadel CEO Ken Griffin. The screenshot, which is just quoted in the filing, allegedly claimed that Griffin planned to “Soros the f*** out of Luna UST.” Soros, presumably, is in reference to George Soros. As part of his strategy, Soros puts his weight either in favor of or against his target, speculating whether it’ll rise or fall.

Another post cited in the document is one from @JacobCanfield on X — formerly Twitter — which claimed back in May 2022 that “rumor is Citadel is the culprit.”

Citadel has previously denied rumors, telling former Blockworks editor-in-chief Dan Keeler that it “does not trade stablecoins, including UST” according to a post on X back in May 2022. The post was also cited in the filing.

In response to the initial subpoenas, Citadel told Terraform, “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,” a Citadel Securities spokesperson said in an email to Blockworks.

Terraform argued in its filing that the trading data should be turned over by Citadel because it could impact the SEC’s case against Terraform, and also “presents little or no burden to Citadel Securities. 

Read more: Judge shuts down Terraform’s motion to dismiss, despite use of Ripple ruling

The Southern District of Florida has yet to weigh in on the filing from Oct. 10, though Terraform requested a transfer of the filing to the Southern District of New York, where the SEC’s case is based, to allow Judge Jed Rakoff to oversee the motion. Rakoff is the presiding judge on SEC v. Terraform.

Updated Oct. 12, 2023 at 2:39 pm ET: Added statement from Citadel Securities.

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