Jane Street Seeks Dismissal of Terraform Lawsuit Linked to UST-LUNA Collapse

A US court has been asked by Jane Street to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, which alleges that the trading firm played a role in the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. In two filings submitted to the Southern District of New York, Jane Street and several employees argue that the case is an attempt to deflect responsibility for the Terra ecosystem's failure, which wiped out approximately $40 billion in value within days. The firm is urging the court to dismiss the complaint with prejudice, preventing Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an attempt by Terraform Labs' estate to hold the company liable for a fraud perpetrated by Terraform itself. The defendants claim that the core issues surrounding Terra's collapse have already been settled in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been sentenced to 15 years in prison for conspiracy and wire fraud. Jane Street argues that Kwon's admission of responsibility for the collapse, stating he was 'alone responsible for everyone's pain,' further supports their position. Terraform's lawsuit, filed by administrator Todd Snyder in January, accuses Jane Street of insider trading, alleging that the firm used nonpublic information to trade ahead of major moves, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg. Jane Street disputes these allegations, denying any involvement in the collapse and maintaining that Terraform's fraud scheme has already been prosecuted, adjudicated, and punished. The company's downfall, which occurred after it filed for bankruptcy in January 2024, had a ripple effect across the crypto sector, contributing to the failures of several firms exposed to the project. The court's decision on Jane Street's motion could significantly impact how responsibility for the collapse is assigned.