Terraform Labs Accuses Citadel Securities of Destabilizing TerraUSD Stablecoin
Terraform Labs has accused Citadel Securities LLC, a U.S.-based market-making firm, of intentionally destabilizing its TerraUSD (UST) stablecoin in May 2022. According to Terraform, the firm’s actions were a result of a “concerted, intentional effort” rather than a failure in the algorithm. The UST stablecoin is designed to maintain a 1:1 peg to the U.S. dollar through an arbitrage strategy. If it trades higher than $1, users are incentivized to mint UST and burn its sister token LUNA, which aims to lower the price of UST by increasing its supply and reducing the supply of LUNA.
Terraform Requests Documents from Citadel Securities
Terraform has filed a motion with the U.S. District Court for the Southern District of Florida, requesting Citadel Securities to produce certain documents related to its trading activities between March and May 2022. Terraform believes that this information is crucial for its defense in a legal action brought by the U.S. Securities and Exchange Commission (SEC), which accuses the company and its co-founder Do Kwon of misleading investors about the stability of TerraUSD.
Citadel Securities Denies Involvement
A spokesperson from Citadel Securities has denied any involvement in the destabilization of the UST stablecoin. They claim that Terraform’s motion is based on false social media posts and that they have already provided information confirming their lack of involvement in the matter.
Terraform Cites Publicly Available Evidence
The filing by Terraform also points to publicly available evidence suggesting that Citadel CEO Ken Griffin intended to short the stablecoin during the de-pegging event in May 2022. It includes a screenshot from a Discord chat where Griffin discussed the plan with a pseudonymous trader. The motion also references a tweet by financial markets trader Jacob Canfield, who speculated that Citadel was responsible for the destabilization of the stablecoin.
Hot Take: Terraform’s Allegations Against Citadel Securities
Terraform Labs has accused Citadel Securities of intentionally destabilizing its TerraUSD stablecoin, claiming that it was a result of a concerted effort rather than an algorithmic failure. Terraform has requested documents from Citadel Securities to support its defense in a legal action brought by the SEC. Citadel Securities denies any involvement in the matter. The filing by Terraform cites publicly available evidence, including a screenshot from a Discord chat and a tweet by a financial markets trader, suggesting Citadel’s intention to short the stablecoin. These allegations highlight the potential risks and challenges faced by stablecoins in maintaining their pegs and the need for regulatory oversight in the crypto industry.
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