Jane Street Seeks Dismissal of Terraform Lawsuit Tied to UST-LUNA Collapse

Jane Street has requested that a US court dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting claims that the trading firm played a role in the 2022 collapse of the TerraUSD (UST) stablecoin and its sister 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 responsibility for the Terra ecosystem's failure, 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 Jane Street, the lawsuit is an attempt by Terraform's estate to hold the firm liable for a fraud that Terraform itself perpetrated on the market. The firm argues that the key issues surrounding Terra's collapse have already been settled 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.' Terraform's lawsuit, filed in January by administrator Todd Snyder, alleges that Jane Street engaged in insider trading that accelerated the collapse. Snyder claims that the firm used non-public information from Terraform insiders to trade ahead of major 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 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 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 could have significant implications for how responsibility for the collapse is assigned.