The brutal fall of the Terra Ecosystem in 2022 was the highlight of the crypto market. It led to a complete wipeout of $40 billion of investment from the crypto space. As the market continues to bear the aftermath of this event, Terraform Labs has blamed Citadel Securities for its role in the depegging of UST.
Quick Take:
- Terraform Labs has filed a motion against Citadel Securities, blaming it for the fall of UST in May 2022.
- The platform has urged Citadel to share its trading activities for the month of May.
- Terra has shared screenshots of the CEO of Citadel against the UST stablecoin.
Terraform Labs has claimed that the fall of its native stablecoin, UST was not due to an algorithmic failure. The platform has argued that Citadel Securities did its part as a concerted, intentional effort to ensure that the stablecoin became worthless.
Terraform Labs filed a motion on October 10, 2023, in the United States District Court in the Southern District of Florida. It is to urge Citadel Securities to provide an insight into its trading activities throughout May 2022. This is the time in which the UST stablecoin lost its peg to $1 and practically fell to zero.
In addition, the platform insists that its stablecoin was manipulated intentionally by certain third-party market participants. Terra further believes that these participants engaged in short-selling of the stablecoin to hurt its algorithmic stability even though the stablecoin’s underlying algorithm was completely fine at that point.
The filing added,
“Instead, Movant contends that the market was destabilized due to the concerted, intentional effort of certain third party market participants to “short” and cause UST to depeg from its one dollar price.”
Terraform Labs Believes Citadel Was Shorting the Stablecoin
As per further details, the filed motion claims that the Citadel CEO, Ken Griffin had deliberate intentions to short the stablecoin in May. Terra believes this fueled the chances of the coin’s depegging. The motion also pointed towards some publicly available proof for its claims.
It included screenshots of a discord conversation where a trader had a conversation with Griffin. In this conversation, Griffin had said “They were going to Soros the f*** out of Luna UST.” The comment was made in reference to George Soros’ trading strategies.
Despite these claims, Citadel and its representatives have repeatedly denied any involvement in UST’s depeg or the fall of the Terra ecosystem. The platform is yet to respond or release a statement to the filed motion.
However, this filing holds significance for Terraform Labs in its defense against the lawsuit filed by the US SEC. The lawsuit claims that the crypto protocol was preparing a multi-billion dollar crypto asset securities fraud.
