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

Jane Street has requested that a US court dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, which alleges that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its associated token, Luna. In a filing submitted to the Southern District of New York, Jane Street and several of its employees contend that the lawsuit is an attempt to deflect responsibility for the failure of the Terra ecosystem, which erased nearly $40 billion in value over several days. The firm is seeking to have the complaint dismissed with prejudice, which would prevent Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an effort to hold the firm accountable for a fraud perpetrated by Terraform itself. The core issues surrounding Terra's collapse have already been resolved in court, with Terraform founder Do Kwon pleading guilty to conspiracy and wire fraud and being sentenced to 15 years in prison. 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 Terraform administrator Todd Snyder in January accuses Jane Street of insider trading, alleging that the firm used confidential information from Terraform insiders to trade ahead of significant market moves. However, 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 participation, 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 cryptocurrency 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.