Bankruptcy judge: Terraform Labs can now subpoena FTX companies.

In the bankruptcy proceedings for insolvent crypto exchange FTX, a judge has signed an order allowing Terraform Labs to subpoena FTX companies. Terraform Labs claimed that the failures of its algorithmic stablecoin and governance token were the result of an attack by short sellers that may have involved Alameda Research.

In a July 31 filing in the U.S. Bankruptcy Court for the District of Delaware, Judge John Dorsey allowed Terraform Labs to serve FTX Trading and FTX US with subpoenas to gather evidence the company could use in its defense against United States Securities and Exchange Commission (SEC) fraud charges.

The crypto company claimed in a July 19 filing that the failures of its algorithmic stablecoin and governance token were the result of a coordinated attack by short-sellers that may have involved Alameda Research.

"The Debtors [FTX] may designate any production in response to the subpoenas pursuant to the terms of the protective order issued in the SEC proceeding or any confidentiality agreement entered into between the Debtors and [Terraform Labs]," the order states.

According to court filings, attorneys for the FTX debtors agreed without formal objection to the court order allowing Terraform Labs to subpoena records related to digital wallets used by short sellers and associated with FTX companies in May 2022.

Terraform Labs was one of the first crypto companies to collapse in 2022, contributing in part to a severe market collapse that led to a decline in the prices of many tokens. FTX filed for bankruptcy in November 2022.

Do Kwon, one of Terra's co-founders, is currently serving a four-month sentence in a Montenegrin prison for using forged travel documents. In addition, he could be extradited to the United States or South Korea on fraud charges.