Terraform allowed to subpoena FTX over Terra/Luna short sellers

Quick Take

  • The subpoena relates to the stablecoin issuer’s defense against an enforcement case brought by the Securities and Exchange Commission.
  • FTX lawyers agreed to a revised version of the original subpoena request.

A federal judge is allowing Terraform Labs, the issuer of the crashed Terra algorithmic stablecoin and related Luna governance token, to issue a subpoena to bankrupt crypto giant FTX.

Terraform maintains that FTX has information relevant to its defense against a Securities and Exchange Commission enforcement action. The company argues that a coordinated shorting of its tokens caused their May 2022 crash, and that Sam Bankman-Fried’s failed crypto empire has information and relevant documents.

On Monday, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware gave special leave for the algorithmic stablecoin company to compel the currently defunct trading platform to provide documents and information relevant to Terraform’s argument.

Lawyers for FTX, who also represent FTX US, also agreed to the order, which was redrafted after a compromise between them and Terraform’s lawyers, since companies and individuals who enter bankruptcy are typically shielded from additional legal action until they exit bankruptcy. FTX will provide the records requested, as long as they’re limited to Terraform’s defense against the SEC’s case.

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