Jane Street Seeks Dismissal of Terraform Lawsuit Over UST-LUNA Collapse

Jane Street has petitioned a US court to dismiss a lawsuit filed by the Terraform Labs bankruptcy estate, denying allegations that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its companion token, Luna. In Thursday's filings to the Southern District of New York, Jane Street and its employees contend that the lawsuit is a misguided attempt to deflect responsibility for the Terra ecosystem's downfall, which wiped out approximately $40 billion in value within a matter of 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 the defendants, the lawsuit is an attempt by Terraform Labs' estate to hold Jane Street financially responsible for a fraud perpetrated by Terraform itself. Jane Street argues that the core issues surrounding Terra's collapse have already been resolved in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been sentenced to 15 years in prison for conspiracy and wire fraud. A jury has also found Kwon and Terraform liable for securities fraud, with Kwon acknowledging that he was 'alone responsible for everyone's pain.' The 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 events, 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 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 firm maintains that 'Terraform's fraud scheme – in which Jane Street had no involvement – has already been prosecuted, adjudicated, and punished.' Founded in 2018, Terraform Labs filed for bankruptcy in January 2024, with its downfall having a ripple effect across the crypto sector and 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.