Jane Street Seeks Dismissal of Terraform Lawsuit Tied to 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 played a role in the 2022 collapse of the TerraUSD stablecoin and its companion 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 failure of the Terra ecosystem, which resulted in the loss of approximately $40 billion in value over a matter of days. The firm has requested that the court dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. Jane Street asserts that the core issues underlying Terra's collapse have already been resolved in court, citing criminal and civil cases against Terraform founder Do Kwon, who has pleaded guilty to 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, alleges that Jane Street engaged in insider trading, utilizing nonpublic information from Terraform insiders to execute trades 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 withdrew 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 throughout the crypto sector, contributing to failures at 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.