Bankruptcy judge approves subpoena for FTX entities by Terraform Labs.

Bankruptcy judge approves subpoena for FTX entities by Terraform Labs.

The Impact of Subpoenas in the Bankruptcy Case of FTX: A Closer Look at the Blockchain Industry

The blockchain industry is known for its transparency and trustless nature, as it provides a decentralized system that records and verifies transactions securely. However, legal disputes and regulatory actions can still arise within this space, and the recent bankruptcy case of FTX exemplifies some of the challenges faced by companies and individuals involved in the blockchain industry.

In a recent development, a judge in the bankruptcy case for defunct crypto exchange FTX issued an order allowing Terraform Labs to subpoena information that could be used in its case brought by the United States Securities and Exchange Commission (SEC). This move brings attention to the interconnectedness of legal proceedings within the blockchain industry and sheds light on the complexities involved.

Unveiling the Claims and Allegations

FTX, once a prominent crypto exchange, has been accused of fraud by the SEC. Terraform Labs, on the other hand, claims that the failures of its algorithmic stablecoin and governance token were the result of a coordinated attack from short sellers, potentially involving Alameda Research. These claims have sparked a legal battle where each party seeks to gather evidence to support its case.

To further its defense against the SEC’s allegations, Terraform Labs sought the ability to subpoena records related to digital wallets used by short sellers connected to FTX entities. This request aims to shed light on the potential involvement of external actors in the alleged attack on Terraform Labs’ platform.

The order issued by Judge John Dorsey allows Terraform Labs to serve FTX Trading and FTX US with subpoenas, enabling them to collect crucial evidence for their defense. Notably, the order states that any production of documents in response to the subpoenas should be in accordance with the terms of the Protective Order entered in the SEC Action or any confidentiality agreement between the parties.

The court order was agreed upon by FTX debtors’ lawyers, who raised no formal objections. This collaboration between the parties involved demonstrates a commitment to ensuring a fair and thorough legal process. By allowing Terraform Labs to gather evidence, the court recognizes the importance of transparency and the need to fully investigate the allegations made in the case.

The Ripple Effect on the Blockchain Industry

The bankruptcy case of FTX and the involvement of Terraform Labs bring attention to the broader issues and challenges faced by participants in the blockchain industry. The collapse of a crypto firm like Terraform Labs can have a significant impact on the market, potentially leading to a major market crash and causing the prices of many tokens to drop.

Furthermore, the case highlights the potential legal implications faced by individuals connected to the blockchain industry. Co-founder of Terra, Do Kwon, is currently serving a prison sentence and may face extradition to the United States or South Korea for fraud charges. Such cases serve as a reminder to all industry participants that actions have consequences, and legal compliance is crucial for long-term success and stability.


The subpoena issued in the bankruptcy case of FTX, allowing Terraform Labs to gather evidence, sheds light on the complexities and legal challenges faced by participants in the blockchain industry. Legal disputes and regulatory actions are not unique to this domain, and the recent developments in the FTX case further emphasize the need for transparency, accountability, and compliance within the industry.

As the blockchain industry continues to mature and evolve, it is crucial for companies and individuals to navigate legal proceedings and regulatory requirements effectively. The outcome of the FTX bankruptcy case and subsequent legal actions will serve as a precedent for future cases and shape the relationship between the blockchain industry and legal systems.

In this ever-changing environment, stakeholders must be aware of their obligations and responsibilities, ensuring that they operate within the boundaries of the law while harnessing the transformative potential of blockchain technology. By doing so, the blockchain industry can continue to thrive and bring about positive change in various sectors of the global economy.