Cryptocurrency TerraUSD's Collapse Triggers Legal Battles and Genesis Subpoena Showdown

The world of cryptocurrencies experienced a significant shock when terraUSD, a digital currency once pegged to the U.S. dollar, suddenly collapsed. Following its downfall in 2022, numerous stakeholders and regulatory bodies sprang into action. Notably, the Securities and Exchange Commission took Terraform Labs, the entity behind terraUSD, to court. They also targeted its co-founder, Do Kwon, alleging that they provided investors with misleading information.

A New York court has since turned its attention to Genesis, a well-known crypto lending and trading firm. Judge Jed Rakoff recently noted that, despite the issuance of subpoenas, Genesis had not provided the required documents. The initial deadline set for this compliance was October 9, which the company did not meet.

Now, the court has ordered Genesis to comply with this request within the next five days. The subpoenas were sent to Genesis Global Capital, Genesis Global Holdco, and Genesis Global Trading on September 12. Interestingly, Genesis operates under the umbrella of the Digital Currency Group, which also has connections with CoinDesk.

Although the specific details of what the court is seeking from Genesis have not been disclosed, it is known that the firm had substantial loan transactions with Three Arrows Capital. This now-defunct hedge fund had significant exposure to the terraUSD stablecoin.

The aftermath of these events led three Genesis-related entities to file for bankruptcy in January 2023. Furthermore, by September, Genesis's trading division had ceased its U.S. spot market operations.

Judge Rakoff faces challenges beyond just Genesis. Conducting Do Kwon's deposition is proving to be a challenging task. Kwon's legal representatives have argued against his appearance in the U.S., citing his ongoing imprisonment in Montenegro due to charges of possessing a counterfeit passport.

However, Judge Rakoff, in a prior order from September, emphasized that Kwon's physical deposition is not an impossible demand. He further cautioned that without Kwon's availability for cross-examination, the co-founder might be precluded from submitting any declarations related to the case.