Terraform Labs has alleged that the collapse of its algorithmic stablecoin and governance token was due to an assault by short sellers, with Alameda Research possibly being involved.
In the bankruptcy proceedings of the now-closed cryptocurrency exchange FTX, a judge has granted Terraform Labs permission to subpoena information that may be relevant to its case with the United States Securities and Exchange Commission (SEC).
Judge Allowed Terraform Labs’ Subpoena
On July 31, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware filed a document stating that Terraform Labs is allowed to subpoena FTX Trading and FTX US in order to gather evidence for its defense against the SEC’s fraud allegations.
Alleging a coordinated assault by short sellers, the cryptocurrency firm filed a report on July 19 attributing the collapse of its algorithmic stablecoin and governance token to their actions, with suspicions that Alameda Research may have played a role in the scheme.
According to the order, FTX, as the Debtors, may label any information produced in response to the Subpoenas in compliance with the Protective Order issued in the SEC Action or any confidentiality agreement established between Terraform Labs and the Debtors.
Attorneys for FTX, who also represents FTX US, consented to the order, which was revised following a compromise between them and Terraform’s legal team. This is because entities and individuals who file for bankruptcy are usually protected from further legal proceedings until they emerge from bankruptcy. FTX will supply the requested records, provided they are restricted to Terraform’s defense in the SEC case.
Terraform Labs was among the initial crypto companies to fail in 2022, contributing to a significant market crash and a decline in the value of numerous tokens. FTX declared bankruptcy in November 2022.
Terra co-founder Do Kwon is currently serving a four-month sentence in a Montenegrin jail after being found guilty of using fake travel documents. He may also be extradited to the United States or South Korea to face fraud charges.
