Jane Street Seeks Dismissal of Lawsuit Over UST-LUNA Crash

Jane Street has petitioned a US court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, arguing that the claims against the trading firm are an attempt to deflect responsibility for the collapse of the TerraUSD stablecoin and its associated token, Luna, in 2022. The firm submitted two filings to the Southern District of New York, asserting that the case is an effort to redistribute blame for the failure of the Terra ecosystem, which led to the erasure of approximately $40 billion in value over several days. Jane Street urged the court to reject 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 compel Jane Street to compensate for a fraud perpetrated by Terraform itself. The core issues surrounding Terra's collapse, Jane Street argued, have already been resolved in court, citing 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 accelerated the collapse. Snyder alleged that the firm utilized nonpublic information from Terraform insiders to trade ahead of significant moves, including substantial 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 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 failures at several firms exposed to the project. The court's decision on Jane Street's motion could significantly influence how responsibility for the collapse is assigned.