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

Jane Street has requested a US court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting claims that the trading firm played a role in the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. In court filings, Jane Street and its employees stated that the lawsuit is an attempt to deflect responsibility for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value. The firm is urging the court to dismiss the complaint with prejudice, preventing Terraform from pursuing the same claims in the future. Jane Street argued that the key issues surrounding Terra's collapse have already been resolved in court, citing cases against Terraform founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and is currently serving a 15-year prison sentence. The company also pointed to a jury's finding that Kwon and Terraform were liable for securities fraud. According to the filing, Kwon acknowledged being 'alone responsible for everyone's pain.' The lawsuit, filed by administrator Todd Snyder in January, accuses Jane Street of insider trading that contributed to the collapse. Snyder alleged that the firm used confidential 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 a wallet linked to Jane Street pulled 85 million UST minutes later, sparking market panic. Jane Street 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.' 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 influence how responsibility for the collapse is assigned.