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

Jane Street has petitioned a US court to reject a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting claims that the trading firm contributed to the 2022 downfall of the TerraUSD stablecoin and its associated token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees contend that the lawsuit is an attempt to deflect accountability for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value over a few days. The firm has urged the court to dismiss the complaint with prejudice, 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 cash from Jane Street to compensate for a fraud that Terraform itself perpetrated on the market.' The company argues that the core issues surrounding Terra's collapse have already been resolved in court, referencing 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 by Terraform administrator Todd Snyder in January 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 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.' Founded in 2018, Terraform Labs 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.