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

Jane Street has petitioned a US court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting allegations that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its companion token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees argued that the lawsuit is an attempt to deflect responsibility for the Terra ecosystem's demise, which wiped out approximately $40 billion in value within a matter of days. The company urged the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. Jane Street contended that the lawsuit is an effort by Terraform's estate to hold the company liable for a fraud perpetrated by Terraform itself. The firm pointed to prior court rulings, including 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, alleges that Jane Street engaged in insider trading, utilizing nonpublic 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, denying 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, with its downfall having far-reaching consequences for the crypto sector, contributing to the failures of several firms exposed to the project. The court's decision on Jane Street's motion may have significant implications for how responsibility for the collapse is assigned.