Genesis ordered to produce documents related to Terra collapse
A New York court has ordered bankrupt crypto lender Genesis Global Capital (GGC) to adhere to a subpoena related to fallout of the terraUSD stablecoin within the next five days. The order comes in light of the company’s failure to meet the initial deadline of October 9.
The US Securities and Exchange Commission accuses Do Kwon, the crypto entrepreneur and former CEO of Terraform Labs, with fraud, alleging that he orchestrated a multibillion-dollar crypto asset securities fraud. The SEC alleges that Kwon marketed the so-called “algorithmic stablecoin” TerraUSD and a series of inter-connected digital assets as profit-bearing securities, claiming that the tokens would increase in value.
While the specifics of the required information have not been explicitly mentioned in the court order, it is known that Genesis had extensive financial interactions with the now-bankrupt hedge fund, Three Arrows Capital. The hedge fund had massive exposure to the troubled stablecoin. Adding to the complexity of the situation, three distinct entities under the Genesis umbrella declared bankruptcy in January 2023. Later that year, in September, its trading division in the U.S. decided to discontinue its spot market operations.
Judge Jed Rakoff, who is presiding over the matter, is also grappling with how to obtain information from Kwon in connection with the case. Kwon’s lawyers argue that it is impossible to bring him to the U.S. because he is detained indefinitely in Montenegro, and providing written testimony would violate his due process rights under the federal law.
However, Rakoff stated that while physical limitations might prevent Kwon from coming to the U.S., it doesn’t preclude him from being deposed. The judge warned Kwon that any declarations from his side would be disallowed if he remained unavailable for cross-examination.
A recent court filing on October 13, detailed that Judge Rakoff has given Genesis a likely deadline until October 18 to submit the requisite documents in compliance with Terraform Labs’ subpoena. The court’s mandate was a result of Genesis’ oversight in not providing the necessary records by the initially set date of October 9, as was mandated by a September 12 subpoena. The specifics about the documents Genesis was supposed to provide remained ambiguous.
