Jane Street Seeks Court Dismissal of Terraform Lawsuit Tied to UST-LUNA Collapse

Jane Street has requested that a US court 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 TerraUSD and its associated token, Luna. In filings submitted to the Southern District of New York, Jane Street and several of its employees argue 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 is urging the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an attempt by Terraform Labs' estate to hold the firm financially responsible for a fraud that Terraform itself perpetrated on the market. The company maintains that the core issues surrounding Terra's collapse have already been addressed in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been sentenced to 15 years in prison for conspiracy and wire fraud. Jane Street also points to a jury verdict that found Kwon and Terraform liable for securities fraud, with Kwon acknowledging that he was 'alone responsible for everyone's pain.' The lawsuit in question, filed by administrator Todd Snyder in January, accuses Jane Street of engaging in insider trading that accelerated the collapse of Terra. Snyder alleges that the firm used confidential information obtained from Terraform insiders to trade ahead of significant market movements, including large withdrawals from the Curve liquidity pool that preceded the loss of UST's 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, triggering market panic. Jane Street disputes this narrative, denying any involvement in the collapse. The company asserts that 'Terraform's fraud scheme – in which Jane Street had no involvement – has already been prosecuted, adjudicated, and punished.' Terraform Labs, which was 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 that were exposed to the project. The court's decision on Jane Street's motion may have significant implications for how responsibility for the collapse is assigned.