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

Jane Street has filed a motion to dismiss a lawsuit brought by the bankruptcy estate of Terraform Labs, contesting claims that the trading firm contributed to the 2022 collapse of the TerraUSD (UST) stablecoin and its sister token Luna. In court filings, Jane Street and its employees contend that the lawsuit is an attempt to deflect responsibility for the failure of the Terra ecosystem, which wiped out approximately $40 billion in value within a matter of days. The firm is seeking to have the complaint dismissed with prejudice, which would prevent Terraform from pursuing the same claims in the future. Jane Street argues that the underlying issues leading to Terra's collapse have already been resolved in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been convicted of conspiracy and wire fraud and is currently serving a 15-year prison sentence. The firm also points to a jury verdict finding Kwon and Terraform liable for securities fraud. According to Jane Street, Kwon has acknowledged being 'alone responsible for everyone's pain.' The lawsuit, filed by Terraform administrator Todd Snyder in January, alleges that Jane Street engaged in insider trading that accelerated the collapse of UST and Luna. Snyder claims that the firm used confidential information from Terraform insiders to trade ahead of major market 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, triggering 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 have significant implications for how responsibility for the collapse is assigned.