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Terraform Labs contends Citadel Securities had a hand in its stablecoin collapse

Terraform Labs has urged the judge to grant its motion to compel trading data from Citadel Securities, which it says had a hand in the collapse of USTC…

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Terraform Labs has urged the judge to grant its motion to compel trading data from Citadel Securities, which it says had a hand in the collapse of USTC in May 2022.

Do Kwon-founded Terraform Labs has again pointed the finger at market maker Citadel Securities for its role in an alleged “concerted, intentional effort” to cause the depeg of its stablecoin in 2022.

On Oct. 10, Terraform Labs filed a motion in the United States District Court in the Southern District of Florida to compel Citadel Securities LLC to produce documents relating to its trading actions in May 2022, around the time its stablecoin, now known as TerraUSD Classic (USTC), depegged.

Screenshot from filing from Terraform compelling Citadel to provide additional documents. Source: courtlistener

It contends the May 2022 depeg, when the asset crashed from $1 to $0.02, was caused by "certain third-party market participants” intentionally shorting the stablecoin, as opposed to instability in its algorithm.

“Movant [Terraform] contends that the market destabilization that occurred did not result from instability in the algorithm underlying the UST stablecoin,” said the firm in its motion.

“Instead, Movant contends that the market was destabilized due to the concerted, intentional effort of certain third party market participants to “short” and cause UST to depeg from its one dollar price.”

The motion also cites “publicly available evidence” suggesting that Citadel head Ken Griffin intended to short the stablecoin around the time of the depeg.

“There is publicly available evidence suggesting that the head of the Citadel Entities, Ken Griffin, intended to short UST at or about the time of the May 2022 depeg.”

The filing cited a screenshot from a Discord channel chat in which a pseudonymous trader had lunch with Griffin, who allegedly said “They were going to Soros the f*** out of Luna UST,” presumably in reference to George Soros' trading strategies — centered around highly leveraged, one-way bets.

Citadel Securities has however previously denied trading the TerraUSD stablecoin in May 2022, according to Forbes.

Cointelegraph contacted Citadel for additional comment but did not receive an immediate response.

Related: Do Kwon says SEC’s extradition request is impossible

In its motion, Terraform argues that the documents are crucial for its defense in the lawsuit filed by the U.S. Securities and Exchange Commission in February, which alleges Terraform Labs and its founder, Do Kwon, had a hand in “orchestrating a multi-billion dollar crypto asset securities fraud.”

“This defense will be substantially impaired if Citadel Securities is successful in withholding this limited information,” it stated.

If the court refuses to compel Citadel to produce the trading documents, Terraform requested the matter be transferred to the U.S. District Court for the Southern District of New York for decision by Judge Rakoff.

In July, Terraform Labs sought permission from a judge to subpoena data from bankrupt crypto exchange FTX, also claiming the information could help its defense.

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ProShares prepares to launch unique Short Ether Strategy ETF

ProShares’ SETH ETF will start trading soon, following the first Ethereum futures ETFs by about two weeks.
ProShares introduced a trio…

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October 14, 2023

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ProShares' SETH ETF will start trading soon, following the first Ethereum futures ETFs by about two weeks.

ProShares introduced a trio of Ethereum futures ETFs in the recent weeks. Presently, the company is gearing up to provide a distinctive offering.

ProShares' Short Ether Strategy ETF (SETH) from the fund group is poised to commence trading shortly, following the debut of the initial Ethereum futures ETFs by about two weeks.

SETH, scheduled for listing on the NYSE Arca exchange, aims to achieve daily investment outcomes that mirror the inverse of the daily S&P CME Ether Futures Index performance, as indicated in a filing made on Friday, Oct. 13.

The fund does not engage in direct shorting of ether (ETH); rather, it seeks to capitalize on potential declines in the asset's value, as stated in the prospectus. On Friday, the price of ETH stood at approximately $1,540, reflecting a decrease of approximately 6% over the past week.

Screenshot of the ProShares SETH filing     Source: SEC

ProShares anticipates that the registration statement for SETH will become effective on Oct. 15 and plans to introduce the fund in early November, as reported by Blockworks.

However, the three existing ProShares ether futures funds — including two that invest in both ether and bitcoin futures contracts — debuted on Oct. 2 alongside similar products by VanEck and Bitwise.

The US Securities and Exchange Commission approved ether futures ETFs two years following the introduction of the initial bitcoin futures ETF, the ProShares Bitcoin Strategy ETF (BITO), which entered the market in Oct. 2021.

Related: SEC reportedly won’t appeal court decision on Grayscale Bitcoin ETF

ProShares continued its release of bitcoin futures ETFs with the Short Bitcoin Strategy ETF (BITI) in June 2022. As of now, BITO has accumulated around $850 million in assets, while BITI has approximately $75 million.

In August, Cointelegraph reported that Ether futures ETFs may be approved in October, causing an 11% spike in ETH prices at the time.

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SEC reportedly won’t appeal court decision on Grayscale Bitcoin ETF

If true, the SEC will need to review and decide on Grayscale’s spot Bitcoin ETF application. If denied, Grayscale could appeal the decision.
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October 14, 2023

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If true, the SEC will need to review and decide on Grayscale’s spot Bitcoin ETF application. If denied, Grayscale could appeal the decision.

The United States Securities and Exchange Commission reportedly has no plans to appeal the recent court decision that favored Grayscale Investments. The ruling requires the SEC to review the firm’s spot Bitcoin (BTC) exchange-traded fund (ETF) application.

The SEC’s supposed decision not to appeal the D.C. Circuit Court of Appeal’s ruling was highlighted in an Oct. 13 report from Reuters, which cited “a source familiar with the matter.”

Bloomberg analysts also expect the SEC not to appeal to the Supreme Court but emphasized that this doesn’t necessarily mean Grayscale’s application is set to be approved.

If the reports are true, the SEC will need to follow the court’s August order and review Grayscale’s application to change its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

According to Reuters, the appeals court is expected to issue a mandate specifically outlining how its ruling should be “executed” by the SEC.

Commenting on the developments, Bloomberg ETF analyst James Seyffart noted via X that:

“I do not think they will appeal to the Supreme Court either. Dialogue between Grayscale and SEC should begin next week. Hoping for more info on next steps sometime next week or week after?”

Moving forward, Seyffart suggested that it is likely that “we will find out in the next week (or two)” what the deadline is for the SEC to approve or deny Grayscale’s spot BTC ETF application.

If the SEC were to deny the application, Grayscale could then appeal that decision, dragging the process out even longer.

Related: Bitcoin price gets new $25K target as SEC decision day boosts GBTC

As it stands, around seven spot Bitcoin ETF applications have been put before the SEC that are awaiting a decision from the regulator.

In a separate preceding X post on Oct. 13, Seyffart reiterated his view that there is a 90% chance that a spot Bitcoin ETF application will get approved in January 2024, specifically the application from Cathie Wood’s ARK Invest.

Seyffart and Bloomberg’s senior ETF analyst Eric Balchunas, also previously suggested that there is a 75% chance that an application will get approved in 2023.

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Coinbase continues push to compel SEC to act on crypto rulemaking petition

Coinbase chief legal officer Paul Grewal has once again called for a mandamus to compel the SEC to respond to the firm’s crypto rulemaking petition.
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October 14, 2023

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Coinbase chief legal officer Paul Grewal has once again called for a mandamus to compel the SEC to respond to the firm’s crypto rulemaking petition.

Coinbase has doubled down on its push for a court order compelling the United States Securities and Exchange Commission (SEC) to act on the firm’s crypto rulemaking petition.

Coinbase wants a mandamus issued within 30 days to compel the SEC to give an official answer on whether it will accept or deny the petition.

The SEC submitted a long-awaited status update on Oct. 12, vaguely stating that “commission staff provided a recommendation” to the SEC over Coinbase’s petition but did not divulge any further details.

In an Oct. 13 post on X (formerly Twitter), Coinbase chief legal officer Paul Grewal slammed the SEC for dragging its heels and called for a mandamus to force the SEC into adequately outlining its intentions.

Grewal also shared Coinbase’s response to the SEC update that it filed with the U.S. Court of Appeals for the Third Circuit.

“The SEC’s unilluminating report is mere bureaucratic pantomime and confirms that nothing short of mandamus will prompt the agency to take its obligations seriously. It took more than a year and an order from this Court to elicit even a staff-level recommendation,” the response reads, adding that:

“The Commission has resolved not to conduct the rulemaking Coinbase requested, and it will exploit every bureaucratic artifice in its arsenal to forestall judicial review so long as the Court allows it.”
Coinbase’s response to the SEC update. Source: Grewal/X

Coinbase initially filed the rulemaking petition in July 2022, requesting the SEC to “propose and adopt rules” to govern the crypto market, including potential rules to clearly outline which digital assets fall under the definition of securities.

After the SEC failed to respond, Coinbase filed a petition for mandamus nine months later, seeking the court to compel the SEC to give a “yes or no” answer.

Related: Coinbase spot trading volume falls by 52% compared to 2022: Report

However, the SEC has fired back multiple times, refuting the need to meet Coinbase’s requirements and asking the court to deny Coinbase’s petition for mandamus.

In mid-June, the SEC asked the court for 120 days to respond to the rulemaking petition. Such a timeline suggests that the agency may have an answer by the end of October or early November.

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