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

Jane Street has petitioned a US court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting claims that the firm contributed to the 2022 downfall of the TerraUSD stablecoin and its associated Luna token. In filings submitted to the Southern District of New York, Jane Street and its employees contend that the lawsuit is a ploy to deflect blame for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value over several days. The firm has urged the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. According to the defendants, the case is an attempt by Terraform Labs' estate to hold Jane Street financially responsible for a fraud perpetrated by Terraform itself. Jane Street maintains that the primary issues surrounding Terra's collapse have already been resolved 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 sole responsibility for the harm caused. Terraform's lawsuit, filed by administrator Todd Snyder in January, alleges that Jane Street engaged in insider trading, utilizing nonpublic information from Terraform insiders to execute trades prior to significant market movements. However, Jane Street disputes this narrative and denies any involvement in the collapse. The firm asserts that Terraform's fraud scheme, in which Jane Street had no participation, has already been prosecuted, adjudicated, and punished. Founded in 2018, Terraform Labs filed for bankruptcy in January 2024, and its demise had a ripple effect throughout the cryptocurrency sector, contributing to the failures of several firms exposed to the project. The court's decision on Jane Street's motion may influence the assignment of responsibility for the collapse.