Genesis, the embattled crypto lender, has been subpoenaed by a New York court to produce documents related to the collapse of the algorithmic stablecoin TerraUSD (UST) last year. This comes after Genesis failed to respond to a prior order.
In a court order dated October 13, Judge Jed Rakoff expressed frustration over Genesis’ lack of response to subpoenas executed by Terraform Labs on September 12. These subpoenas required Genesis to produce documents by October 9.
“The court grants the defendant’s motion to enforce the subpoenas and orders the Genesis entities to produce, within five days of this order being served on the Genesis entities, all documents that are responsive to the subpoenas,”
wrote Rakoff in the order.
Genesis’ Troubles Amid Crypto Market Instability
Genesis is one of several crypto lending and trading firms that faced difficulties following the collapse of FTX and Alameda Research in November 2022. These firms, including Genesis, suffered heavy losses due to their exposure to both companies.
FTX executives, testifying this month, revealed that the balance sheet troubles of Alameda and FTX were amplified in June as crypto asset prices declined, and rival trading firms faced challenges as well.
Terra’s Role in the Market Turmoil
The collapse of firms such as Three Arrows Capital (3AC) can be attributed largely to Terra, whose death spiral resulted in a $44 billion loss across both its Terra (LUNA) token and TerraUSD (UST) stablecoin.
The U.S. Securities and Exchange Commission (SEC) has launched investigations into Terraform Labs and its founder, Do Kwon, for alleged misconduct, including misleading investors and manipulating trading volume on the blockchain.
Kwon, who is currently in jail in Montenegro for possessing a fake U.S. passport, is being pressed by Judge Rakoff to provide information despite his incarceration. The judge cautions that Kwon cannot make any declarations in the case without being available for cross-questioning.
Meanwhile, Genesis is dealing with its own set of challenges. The company has filed a lawsuit against its parent company, Digital Currency Group (DCG), for failure to repay $620 million in loans. In January, Genesis declared bankruptcy and had to lay off 30% of its workforce. In September, the company also announced the cessation of its U.S. spot market trading operations, citing unspecified business reasons.
