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

Jane Street has requested that a US court dismiss a lawsuit filed by Terraform Labs' bankruptcy estate, denying allegations that the trading firm contributed to the 2022 collapse of TerraUSD (UST) and its associated token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees argue that the case is an attempt to shift responsibility for the Terra ecosystem's failure, which wiped out approximately $40 billion in value. The firm is urging the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. Jane Street contends 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 claims that the firm used non-public information from Terraform insiders to trade ahead of significant moves, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg. For instance, the complaint alleges 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 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 failures at several firms exposed to the project. The court's decision on Jane Street's motion could influence how responsibility for the collapse is assigned.