In a recent development surrounding the tumultuous failure of the stablecoin terraUSD (UST), Genesis, a leading crypto lending and trading entity, has been directed by a New York judicial authority to comply with a subpoena within a tight five-day timeframe. The urgency arises after Genesis missed the previous deadline of October 9. The issue stems from the 2022 collapse of the Terra ecosystem with the crash of UST and LUNA.
To date, Genesis entities have produced no documents in response to the subpoenas.
Judge Jed Rakoff
Terraform Labs under the spotlight
The rapid deterioration of UST has not only rocked the crypto universe, but also attracted regulatory interventions. Following the dramatic fall of the stablecoin, the Securities and Exchange Commission has taken legal action against Terraform Labs, the main organization fueling the token, as well as its co-founder Do Kwon, accusing them of deceiving their investors. Judge Jed Rakoff explained in a recent court statement that the “Genesis Entities” have not submitted any documentation in response to the subpoenas sent to Genesis Global Capital, Genesis Global Holdco, and Genesis Global Trading on September 12.
The links between the different entities
Although the court did not specify what exact information it is seeking from Genesis, it is widely recognized that Genesis had granted loans totaling billions to the now-defunct hedge fund Three Arrows Capital. This fund had significant holdings in the UST stablecoin, which is at the heart of this controversy.
The plot thickens as three Genesis subsidiaries filed for bankruptcy in January 2023, followed by the cessation of its operations on the US spot market later in September. Adding another layer to this complicated legal saga, Judge Rakoff is seeking to extract information from Do Kwon regarding the ongoing case. However, Do Kwon’s legal representation highlights his inability to be present in the United States due to his current imprisonment in Montenegro for charges of a fake passport. Judge Rakoff, in his September statement, refuted such claims, stating that Kwon’s physical constraints do not nullify his prospects for deposition.
