Court Urged to Dismiss Terraform Lawsuit Against Jane Street Over UST-LUNA Collapse

Jane Street has requested that a US court 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 TerraUSD (UST) and its sister token Luna. In a filing to the Southern District of New York, Jane Street and several employees claim that the lawsuit is an attempt to deflect responsibility for the failure of the Terra ecosystem, which wiped out approximately $40 billion in value. The firm is seeking to have the complaint dismissed with prejudice, preventing Terraform from pursuing the same claims in the future. Jane Street argues that the key issues surrounding Terra's collapse have already been resolved in court, citing cases against Terraform founder Do Kwon, who has been found guilty of conspiracy and wire fraud and is currently serving a 15-year prison sentence. The firm claims that Kwon has taken responsibility for the fraud, stating that he was 'alone responsible for everyone's pain.' Terraform's lawsuit, filed in January, accuses Jane Street of insider trading, alleging that the firm used confidential information from Terraform insiders to trade ahead of major market moves. However, Jane Street disputes this narrative and denies any involvement in the collapse. The firm maintains that Terraform's fraud scheme, in which Jane Street had no involvement, has already been prosecuted and punished. The court's decision on Jane Street's motion could have significant implications for how responsibility for the collapse is assigned. Terraform Labs, which was founded in 2018, filed for bankruptcy in January 2024, and its downfall had a ripple effect across the crypto sector, contributing to the failures of several firms exposed to the project.