Jane Street Seeks Dismissal of Lawsuit Tied to UST-LUNA Collapse

Jane Street has requested that a US court dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, denying allegations that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. In court filings submitted on Thursday, Jane Street and its employees contended that the lawsuit is an attempt to deflect responsibility for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value over several days. The firm is urging the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. According to Jane Street, 'this case is an attempt by the estate of Terraform Labs to extract money from Jane Street to compensate for a fraud that Terraform itself perpetrated on the market.' The company argued that the primary issues surrounding Terra's collapse have already been resolved in court, citing criminal and civil cases against Terraform founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and is currently serving a 15-year prison sentence. A jury also found Kwon and Terraform liable for securities fraud, with Kwon acknowledging that he was 'alone responsible for everyone's pain.' Terraform's lawsuit, filed in January by administrator Todd Snyder, accuses Jane Street of insider trading that accelerated the collapse. Snyder alleges that the firm utilized non-public information from Terraform insiders to trade ahead of significant market moves, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg. For instance, the complaint claims that Terraform withdrew 150 million UST on May 7, 2022, and that a wallet linked to Jane Street pulled 85 million UST minutes later, sparking market panic. Jane Street disputes this narrative and denies any involvement in the collapse. The company maintains that 'Terraform's fraud scheme — in which Jane Street had no involvement — has already been prosecuted, adjudicated, and punished.' Terraform Labs, 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. The court's decision on Jane Street's motion could have significant implications for how responsibility for the collapse is assigned.