Terraform Labs Accuses Citadel Securities of Role in Stablecoin Depreciation

By: Isha Das

Terraform Labs has filed a motion to compel Citadel Securities LLC to produce documents relating to trading actions that might have caused the depreciation of Terraform's stablecoin, TerraUSD Classic (USTC), in May 2022. Terraform Labs attributes the depreciation, which saw the value of the asset crash from $1 down to $0.02, to third-party market participants shorting the stablecoin, rather than any instability in its algorithm.

The filing cites publicly available evidence that suggests Citadel's head, Ken Griffin, intended to short the stablecoin during that period. A screenshot from a Discord chat, in which an anonymous trader allegedly had a conversation with Griffin hinting towards manipulating the stablecoin's value, was used as support for the claim. Citadel Securities has denied trading the TerraUSD stablecoin in May 2022, according to a previous report by Forbes.

Terraform argues these documents are crucial for its defense in a lawsuit by the U.S. Securities and Exchange Commission made in February, which accuses Terraform Labs and its founder, Do Kwon, of orchestrating a multi-billion dollar crypto asset securities fraud.