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

Jane Street has petitioned a US court to reject a lawsuit filed by the bankruptcy estate of Terraform Labs, arguing that the claims of triggering the 2022 collapse of the TerraUSD stablecoin and its sister token Luna are unfounded. In a Thursday filing to the Southern District of New York, Jane Street and its employees contended that the lawsuit is a bid to shift responsibility for the Terra ecosystem's failure, which wiped out approximately $40 billion in value within days. The firm has urged the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an attempt to 'extract cash' to compensate for a fraud perpetrated by Terraform itself. The defendants pointed out that the key issues surrounding Terra's collapse have already been resolved in court, citing criminal and civil cases against Terraform founder Do Kwon, who is currently serving a 15-year prison sentence after pleading guilty to conspiracy and wire fraud. A jury also found Kwon and Terraform liable for securities fraud, with Kwon acknowledging he was 'alone responsible for everyone's pain'. Terraform's lawsuit, filed by administrator Todd Snyder in January, alleges that Jane Street engaged in insider trading that accelerated the collapse by utilizing nonpublic information from Terraform insiders to trade ahead of significant moves. However, Jane Street disputes this narrative, denying any involvement in the collapse and maintaining that 'Terraform's fraud scheme – in which Jane Street had no involvement – has already been prosecuted, adjudicated, and punished'. The downfall of Terraform Labs, founded in 2018 and filed for bankruptcy in January 2024, had 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 could significantly impact how responsibility for the collapse is assigned.