Court Urged to Dismiss Terraform Lawsuit Against Jane Street Over UST-LUNA Collapse

In a motion filed with the U.S. court, Jane Street has requested the dismissal of a lawsuit brought by Terraform Labs' bankruptcy estate, asserting that the claims are an attempt to deflect responsibility for the 2022 collapse of TerraUSD and Luna. The trading firm contends that the lawsuit reiterates events that have already been resolved in court and seeks compensation for losses stemming from internal misconduct. Jane Street and its employees claim the case is a ploy to shift the blame for the Terra ecosystem's demise, which erased roughly $40 billion in value. The defendants are 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 primary issues leading to Terra's collapse have already been settled in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been found guilty of 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 solely responsible for the harm caused. Terraform's lawsuit, filed in January by administrator Todd Snyder, alleges that Jane Street engaged in insider trading, utilizing non-public information from Terraform insiders to trade ahead of significant market moves. However, 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. 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 may influence how responsibility for the collapse is assigned.