Terraform claims to have evidence that Ken Griffin, head of Citadel Securities, planned to use Soros’ strategy to short stablecoins.
In the latest twist, defunct crypto network Terraform Labs has accused Citadel Securities of intentionally participating in the destabilization of its stablecoin TerraUSD classic (USTC) in 2022, ultimately leading to its demise.
Meanwhile, Terraform Labs and its founder Do Kwon continue to face legal troubles.
Terraform Labs blames Citadel
In a filing on Oct. 10 with the U.S. District Court for the Southern District of Florida, the defunct crypto network asked the court to compel Citadel Securities LLC to provide documents related to its trading activity at the time of its May 2022 USTC decoupling.
Last May, USTC experienced a massive drop in its share price, falling nearly 70% in just a few hours and ultimately dropping to $0.02 later that month. While there were initial claims that the algorithm was unstable, Terraform now claims that the crash was primarily due to a few third-party market participants.
Terraform cited “public evidence” in its filing that Citadel Securities head Ken Griffin planned to short the stablecoin at that time.
A Terraform Labs representative noted,
“We believe that the market instability was not caused by the instability of the underlying algorithm of the UST stablecoin. Instead, some third-party market participants deliberately shorted it, causing it to deviate from the one-dollar price.”
The report mentioned evidence from a Discord chart, in which an anonymous person claimed that Griffin planned to use George Soros’ trading strategy on Luna UST.
Shortly after UST ran into trouble in early May 2022, an X (Twitter) user @JacobCanfield (currently with about 90,000 followers) tweeted on May 9 that "rumor is that citadel is the culprit" and that he borrowed 100,000 BTC and used it to open a short position in UST. Later they began to sell UST to depeg it.
The filing mentions that Citadel has $61 billion in resources, making it large enough to attempt to improperly influence the market. The court filing highlights a case earlier this year in which Citadel was fined $9.66 million in South Korea for high-frequency algorithmic trading.
Past Subpoenas and Ongoing Cases
In the past, Terraform Labs has asked the court for permission to obtain data from the defunct exchange FTX to build its case and defense.
The development comes even as the failed network’s founder and former executive Do Kwon faces a legal case for a multi-billion dollar fraud. The former crypto influencer was sentenced to four months in prison in Montenegro in June for forging travel documents. However, he has bigger problems waiting for him in the United States and South Korea.
Earlier this month, a group of investors who had initially filed a class-action lawsuit against Do Kwon and Terraform Labs dropped the suit, reducing Terra’s legal problems.
