Terraform Labs Alleges Citadel Securities Disrupted UST Stablecoin

Terra Classic Do Kwon

Terraform Labs Accuses Citadel Securities of Plotting to Disrupt TerraUSD Classic Stablecoin in 2022, Resulting in Its Collapse.

In recent developments, Terraform Labs, a crypto network that’s no longer operational, has accused Citadel Securities of being involved in a deliberate plan to disrupt its stablecoin, TerraUSD Classic (USTC), back in 2022. This disruption ultimately led to the stablecoin’s failure.

These allegations have emerged at a time when Terraform Labs and its founder, Do Kwon, are dealing with ongoing legal issues.

Terraform Labs Accuses Citadel Securities

Terraform Labs has filed a legal document in a U.S. District Court in Florida, asking the court to request Citadel Securities LLC to provide documents related to their trading activities in May 2022 when TerraUSD classic (USTC) lost its peg.

In May 2022, USTC experienced a significant drop, losing almost 70% of its value in a short time, eventually falling to $0.02 later that month. Initially, there were suspicions of issues with the algorithm, but Terraform now suggests that external market participants deliberately caused the crash.

Terraform refers to publicly available evidence indicating that Ken Griffin, the head of Citadel Securities, had plans to short the stablecoin during that period.

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According to Terraform, the destabilization wasn’t due to problems with the UST stablecoin’s algorithm. Instead, they claim it resulted from specific third-party market participants intentionally shorting it, causing it to lose its peg.

The document references a Discord chat where an anonymous person discussed Griffin’s intention to use George Soros’ trading strategies on Luna UST. In early May 2022, a Twitter user named @JacobCanfield tweeted that “the rumor is Citadel is the culprit,” suggesting they borrowed 100K BTC to open a short position on UST and subsequently dumped UST to make it lose its peg.

The court document points out that Citadel’s substantial $61 billion in assets could enable them to improperly influence markets. It also highlights an incident earlier in the year when Citadel was fined $9.66 million in South Korea for high-frequency algorithmic trading.

Previous Legal Actions and Ongoing Lawsuits

Terraform Labs had previously sought court approval to access data from the now-closed FTX exchange for their legal defense.

These recent developments come amidst ongoing legal troubles for Do Kwon, the founder and former executive of the defunct network. He is facing serious allegations of multi-billion dollar fraud. In June, he was imprisoned for four months in Montenegro due to the forgery of travel documents. However, he still faces more extensive legal challenges in the United States and South Korea.

Notably, earlier this month, a group of investors who had initially initiated a class-action lawsuit against Do Kwon and Terraform Labs decided to drop their case, which has reduced Terra’s legal complications.

Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.

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