Key Takeaways
- Terraform Labs has asked a judge for permission to subpoena crucial information from FTX.
- SEC argues that between 2018 and 2022 Terra raised billions from investors by marketing and selling crypto securities without proper registration.
Terraform Labs has taken a significant legal step in defending itself against fraud charges leveled by the US Securities and Exchange Commission (SEC). Seeking to bolster their case, Terraform Labs has asked a judge for permission to subpoena crucial information from the now-defunct cryptocurrency platform FTX.
It is reported that the data from FTX could potentially shed light on the events leading to the collapse of Terraform Labs’ tokens, TerraUSD and Luna. Terraform Labs’ legal team argues that the downfall of their tokens was not a mere coincidence but rather a result of a coordinated attack by short sellers.
They assert that FTX’s associated trading house, Alameda Research, orchestrated this effort. The SEC, on the other hand, alleges that between 2018 and 2022, Terraform and its founder, Do Kwon, raised billions from investors by marketing and selling crypto securities without proper registration.
The regulators claim that the company provided misleading information about the stability and growth potential of their tokens while also misrepresenting how their blockchain functioned within a well-known Korean payment application.
In response to the SEC’s allegations, Terraform Labs seeks access to specific records from FTX that could help establish their defenses. The requested information includes details about wallets, accounts, and assets used for transactions on FTX’s International and US exchanges, as well as the sales and offers of large volumes of cryptocurrencies developed by Terraform Labs, if any, by FTX Trading and West Realm Shires Services Inc. d/b/a FTX US.
The legal battle began on February 16 when the SEC filed a lawsuit against Terraform Labs and its founder, Do Kwon, accusing them of orchestrating a multi-billion dollar crypto asset securities fraud.
The allegations mainly revolved around the unregistered securities operation involving Terraform’s algorithmic stablecoin, TerraUSD (UST), and the Terra Luna (LUNA) token. The collapse of Terraform Labs in 2022 reportedly caused a staggering loss of over $40 billion from the cryptocurrency markets.
Terraform Labs, which has been facing immense regulatory scrutiny ever since its token imploded last year, is also now seeking to have a class-action lawsuit against the firm dismissed.
In May, Terraform Labs requested a California federal judge dismiss an investor suit brought by Nick Patterson that claimed the firm sold unregistered securities and misled investors. The latest development also comes amid the company appointing Chris Amani as its new CEO.
