Written by Hazel J. Greene, Senior Analyst

Terraform Labs (TFL), the developer behind the Terra blockchain, has filed a court motion seeking permission to subpoena cryptocurrency exchange FTX for relevant documents. TFL intends to use these documents to bolster its defense against an ongoing case brought by the U.S. Securities and Exchange Commission (SEC). This blog post delves into the details of the request and sheds light on the significance of this evidence in TFL’s defense.

Terraform Labs argues that the requested documents, which contain records of wallets, accounts, and assets used for transactions on FTX International and US exchanges, as well as the sales and offers of cryptocurrencies developed by TFL, are crucial for its defense. TFL believes that these documents are within the possession, custody, and control of the Debtors, including FTX Trading Ltd. and West Realm Shires Services Inc, both of which are debtors-in-possession under sections of the Bankruptcy Code.

TFL also seeks information regarding wallets used by Jump Trading to trade UST or LUNA on FTX International and US exchanges between specific time periods. Besides that, TFL requests details about wallets and trading accounts used by short sellers to deposit, transfer, or trade assets during a particular time frame. Additionally, TFL aims to acquire information about the balances/holdings and identities of owners/controllers of these wallets and trading accounts dating back to January 1, 2018.

Moreover, Chris Amani, the new CEO of Terraform Labs, has provided evidence in the ongoing case to the SEC, implicating short sellers for initiating the attack on UST. Amani has filed a supporting motion, presenting publicly available order book information indicating that the proceeds from massive sell orders were transferred to FTX exchange deposit wallets. This evidence supports TFL’s defense against the SEC’s allegations, suggesting the involvement of FTX-related accounts in the attack on UST.

TFL asserts that the requested document discovery and information can only be obtained through subpoenas on the Debtors, emphasizing the critical role this evidence plays in their defense against the SEC. The court filing emphasizes that TFL’s ability to present a robust defense is at risk without access to the requested information. However, as the trial is expected after November 30, 2023, the New York court requires time to issue the necessary subpoenas to Debtors.

As Terraform Labs prepares for its upcoming trial against the SEC, the developer aims to strengthen its defense by acquiring relevant documents from FTX through a subpoena. With the evidence obtained, TFL hopes to refute the SEC’s allegations and demonstrate the involvement of short sellers and FTX-related accounts in the attack on UST. The court’s decision on TFL’s subpoena request will play a significant role in shaping the outcome of this ongoing legal battle.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.