In a recent filing to the Southern District of New York, Jane Street requested the dismissal of a lawsuit filed by the bankruptcy estate of Terraform Labs. The lawsuit accuses Jane Street of contributing to the 2022 collapse of the TerraUSD (UST) stablecoin and its associated token Luna. According to documents submitted Thursday, Jane Street and some employees argue that the case is an attempt to deflect blame for the Terra ecosystem’s failure, which resulted in a $40 billion loss within days.
Jane Street is advocating for the complaint to be dismissed with prejudice, thereby preventing Terraform from reasserting these claims. The defendants assert, “This lawsuit aims to hold Jane Street financially accountable for a market fraud committed by Terraform itself,” as detailed in their filing.
The firm contends that key issues surrounding Terra’s collapse have already been resolved legally. It references the criminal and civil proceedings against Do Kwon, Terraform’s founder, who has admitted to conspiracy and wire fraud charges and is currently serving a 15-year sentence. Additionally, a jury found both Kwon and Terraform liable for securities fraud. According to court records, Kwon acknowledged being “solely responsible for everyone’s suffering.”
The lawsuit initiated by administrator Todd Snyder in January accuses Jane Street of engaging in insider trading that exacerbated the crash. Snyder’s complaint alleges that Jane Street acted on nonpublic information from insiders at Terraform to make trades before significant market events, including large withdrawals from the Curve liquidity pool that precipitated UST’s peg loss.
For instance, it is alleged that Terraform withdrew 150 million UST on May 7, 2022, and a Jane Street-associated wallet subsequently removed 85 million UST shortly thereafter, causing panic in the market. Jane Street refutes this narrative and denies any involvement in the collapse.
Jane Street maintains its stance that “Terraform’s fraud scheme — absent any involvement from Jane Street — has already been prosecuted, adjudicated, and punished.”
Since filing for bankruptcy in January 2024, Terraform Labs’ downfall has had widespread impacts across the cryptocurrency sector, contributing to failures at various firms connected to the project. The court’s decision on Jane Street’s motion could be pivotal in determining responsibility for this collapse.