Terraform Labs seeks access to FTX wallets to defend against fraud

Terraform has filed a request for access to information about wallets used by short sellers during the collapse of its algorithmic stablecoin in 2022.

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Terraform Labs is asking a judge for permission to subpoena data from bankrupt crypto exchange FTX, saying the information could help it defend against a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in February, according to a court filing.

In a search for evidence that could support its defense against the fraud charges, Terraform attorneys filed a July 19 motion in FTX's bankruptcy case for access to company information about digital wallets used by short sellers between March 2022 and May 2022. Terraform claims its stablecoin failure was the result of a coordinated attack by short sellers, possibly involving Alameda Research, FTX's sister company.

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"To establish these defenses, TFL requires debtor records relating to wallets, accounts, and assets used to transact on FTX's international and U.S. exchanges and large volume sales/offers of TFL-developed cryptocurrencies, as applicable, by FTX Trading and West Realm Shires Services Inc. d/b/a FTX US."

On February 16, the SEC filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly "orchestrated a multi-billion dollar crypto asset fraud". According to the regulator, Terraform was offering unregistered securities as part of a deal through its failed algorithmic stablecoin, TerraUSD (UST), and the Terra Luna token (LUNA). The failure of Terraform in 2022 resulted in a loss of over $40 billion in the crypto markets.

Screenshot of request from Terraform requesting permission to assign FTX information. Source: Kroll

The request also requested information...