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

Jane Street has petitioned a US court to reject a lawsuit filed by Terraform Labs' bankruptcy estate, contesting allegations that the firm contributed to the 2022 collapse of TerraUSD and Luna. In Thursday's filings to the Southern District of New York, Jane Street and its employees argued that the case is a misguided attempt to deflect responsibility for the Terra ecosystem's demise, which resulted in approximately $40 billion in losses. The firm requested that the complaint be dismissed with prejudice, preventing Terraform from pursuing the same claims in the future. The defendants asserted that the lawsuit is an attempt by Terraform's estate to hold Jane Street financially responsible for a fraud perpetrated by Terraform itself. Jane Street maintained that the core issues surrounding Terra's collapse 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.' The lawsuit, filed by administrator Todd Snyder in January, 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 market 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 disputed this narrative and denied any involvement in the collapse. The firm emphasized 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 significantly impact how responsibility for the collapse is assigned.