FTX Data Requested by Terraform in SEC Lawsuit Battle

Terraform Labs has asked a judge for permission to subpoena information from defunct cryptocurrency platform FTX, arguing the data could aid in its defense against fraud charges from the US Securities and Exchange Commission (SEC), Bloomberg reports.

The company's lawyers attribute the collapse of their tokens TerraUSD and Luna to a coordinated assault by short sellers, claiming that FTX's associated trading house, Alameda Research, orchestrated the effort.

The SEC states that between 2018 and 2022, Terraform and Kwon gathered billions from investors by marketing and selling crypto securities that weren't officially registered. They allegedly gave a false impression of their tokens' stability and prospective value growth, and provided misleading information about how their blockchain worked within a well-known Korean payment application.

Kwon is seeking the dismissal of charges by the U.S. Securities and Exchange Commission (SEC) based on claims of insufficient jurisdiction and the argument that the involved stablecoin, UST, is a currency rather than a security.

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While still facing criminal fraud charges in both the U.S. and South Korea, Kwon argues that his enterprise's digital assets were not targeted specifically at U.S. persons and that the SEC has no authority over these digital assets, further stating that Terraform did not conduct any public offerings warranting SEC registration.

The Terra network, originally a promising cryptocurrency ecosystem that peaked at $60 billion, experienced a dramatic crash after its algorithmic stablecoin terraUSD (UST) lost its $1 peg and dropped to 35 cents and its companion token, LUNA, fell to a few cents in May 2022.

Despite efforts to stabilize the network by Kwon and the Luna Foundation Guard, the platform faced a significant loss of capital, damaging investor trust and ultimately leading to the launch of a new blockchain, "Terra 2.0," without a stablecoin, and the renaming of the old Terra blockchain tokens to luna classic (LUNC).