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

Jane Street has petitioned a US court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, arguing that the claims against them are unfounded and an attempt to deflect responsibility for the 2022 collapse of the TerraUSD stablecoin and its companion token, Luna. In court documents submitted on Thursday to the Southern District of New York, Jane Street and several of its employees asserted that the lawsuit is a ploy to shift the blame 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 reject the complaint with prejudice, thereby 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 them financially responsible for a fraud perpetrated by Terraform itself. The defendants argued that the primary issues surrounding Terra's collapse have already been resolved in court, citing the 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 allegedly accelerated the collapse. Snyder claims that Jane Street utilized non-public information from Terraform insiders to trade ahead of significant moves, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg. For instance, the complaint alleges 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 significantly impact how responsibility for the collapse is assigned.