Jane Street Seeks Dismissal of Lawsuit Related to UST-LUNA Collapse

Jane Street has petitioned a US court to dismiss a lawsuit filed by the Terraform Labs bankruptcy estate, contesting allegations that the trading firm contributed to the 2022 implosion of the TerraUSD stablecoin and its associated token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees contend that the lawsuit is a misguided attempt to assign blame for the Terra ecosystem's demise, which resulted in the loss of approximately $40 billion in value over 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 a blatant attempt to hold the company responsible for a fraud perpetrated by Terraform, with the defendants stating that 'this case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.' Jane Street argues that the primary issues surrounding Terra's collapse have already been resolved through various court proceedings, including 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. A jury has also found Kwon and Terraform liable for securities fraud, with Kwon acknowledging that he was 'alone responsible for everyone's pain.' The lawsuit, filed by administrator Todd Snyder in January, accuses Jane Street of engaging in insider trading that accelerated the collapse of the Terra ecosystem. Snyder alleges that Jane Street utilized nonpublic information obtained from Terraform insiders to execute trades ahead of significant market movements, including large withdrawals from the Curve liquidity pool that preceded the depegging of UST. 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 widespread market panic. Jane Street vehemently 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.' Founded in 2018, Terraform Labs filed for bankruptcy in January 2024, and its downfall had far-reaching consequences for the crypto sector, contributing to the failures of several firms with exposure to the project. The court's decision on Jane Street's motion will have significant implications for the assignment of responsibility for the collapse.