Terraform Labs appears to work on forming a solid defense against allegations lodged by US SEC.
Terraform Labs, a troubled cryptocurrency company, has approached a judge for permission to subpoena information from the now-bankrupt cryptocurrency exchange FTX.
According to court documents, Terraform believes the data could assist in building a solid defense against the charges brought by the US Securities and Exchange Commission in February.
Did you know?
Want to get smarter & wealthier with crypto?
Subscribe - We publish new crypto explainer videos every week!
What Are Oracles in Crypto? (Beginner Friendly Animation)
Terraform’s lawyers lodged a motion on July 19th during FTX's bankruptcy proceedings, seeking access to the crypto exchange's records regarding digital wallets utilized by short sellers from March to May 2022.
In the request, Terraform alleges that its stablecoin's failure was the consequence of a concerted effort by the short sellers, potentially involving FTX's sister firm Alameda Research.
Regarding the matter, the motion issued by the Terraform Labs lawyers reads:
To establish these defenses, TFL needs Debtors’ records about wallets, accounts, and assets used to transact on the FTX International and US exchanges and sales/offers of large volumes of cryptocurrencies developed by TFL, if any, by FTX Trading and West Realm Shires Services Inc. d/b/a FTX US.
The lawsuit issued by the US SEC at the beginning of the year accuses Terraform Labs and its founder, Do Kwon, of conducting a "multi-billion dollar crypto asset securities fraud."
The SEC claimed that Terraform offered unregistered securities through its failed algorithmic stablecoin, TerraUSD (UST), and the Terra Luna (LUNA) token, leading to over $40 billion in losses from the cryptocurrency market in 2022.
The motion filed by Terraform also sought details about wallets associated with Jump Trading.
In its lawsuit, the SEC alleged that Jump Trading collaborated with Terraform to manipulate the UST price. The court filing stated:
Defendants misrepresented UST’s recovery by claiming that the algorithm was able to restore and maintain the price peg. According to the SEC, UST instead recovered its price peg because Defendants entered an arrangement with a US trading firm, Jump Trading, <...> to purchase substantial amounts of UST to support the price.
It is worth noting that Terraform is also looking to have a simultaneous class-action lawsuit dismissed in California. It argues that the US securities laws cited in that lawsuit do not apply to its protocols, as they were developed in Singapore.
