Judge Grants Terraform Labs' Subpoena of FTX Entities Regarding UST Failure

In the FTX bankruptcy proceedings, the judge has granted Terraform Labs the permission to subpoena pertinent information from the exchange concerning its ongoing case with the U.S. Securities and Exchange Commission (SEC).

On July 31st, Judge John Dorsey's filing permits Terraform Labs to issue subpoenas to FTX Trading and FTX.US to collect evidence for their defense against the SEC's fraud allegations.

According to the court filing, "The Debtors [FTX] may designate any production in response to the Subpoenas in accordance with the terms of the Protective Order entered in the SEC Action or any confidentiality agreement entered into between the Debtors and [Terraform Labs]."

Last month, Terraform Labs faced issues with its algorithmic stablecoin and governance token, attributing it to a potential attack by short-sellers. Speculations point towards Alameda Research's possible involvement in the attack.

Court documents reveal that the FTX debtors' legal team had "no formal objection" to the court order.

Terraform Labs experienced a collapse in mid-2022 when its stablecoin project UST plummeted nearly to zero, leading FTX to declare bankruptcy in November of the same year.

In June, Swiss reports led to the freezing of $26 million worth of assets from Terraform Labs and its founder, former crypto billionaire Do Kwon. The frozen assets also involved Kwon's associate Hang Chang-joon and former head of research at Terraform Labs, Nicholas Platias.

In addition, South Korean prosecutors reported in June that Kwon had moved $29 million worth of crypto assets out of Terraform Labs' possession after his arrest in Montenegro.

Kwon has already served more than three months of a four-month prison sentence in Montenegro for using a forged Costa Rican passport. However, this relatively short sentence is unlikely to be the end of the Terra founder's legal troubles. Dan Sunghan, the director of the financial crime investigation bureau at the Seoul Southern District Prosecution Service, recently stated that Kwon could face more than four decades behind bars due to his involvement in what is believed to be the largest financial fraud case in South Korean history.

Aug 02, 2023