Jane Street Seeks 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, arguing that the claims regarding the trading firm's involvement in the 2022 collapse of the TerraUSD stablecoin and its sister token Luna are unfounded. In filings submitted to the Southern District of New York, Jane Street and its employees asserted that the case is an attempt to deflect responsibility for the failure of the Terra ecosystem, which wiped out approximately $40 billion in value within a matter of days. The firm urged the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. Jane Street argued that the primary issues surrounding Terra's collapse have already been resolved in court, citing the 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 Terraform's administrator, Todd Snyder, alleges that Jane Street engaged in insider trading, utilizing nonpublic 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. However, 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, with its downfall having a ripple effect across the crypto sector and contributing to the failures of 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.