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

Jane Street has petitioned a US court to throw out a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting allegations that the trading firm played a role in the 2022 implosion of the TerraUSD stablecoin and its companion token, Luna. In filings submitted to the Southern District of New York, Jane Street and several of its employees argued that the case is a thinly veiled attempt to deflect responsibility for the failure of the Terra ecosystem, which saw nearly $40 billion in value vanish in a matter of days. The firm urged the court to dismiss the complaint with prejudice, thereby precluding Terraform from pursuing the same claims in the future. According to Jane Street, this lawsuit is a transparent attempt by Terraform's estate to extort money from the company to compensate for a fraud that Terraform itself perpetrated on the market. The defendants pointed out that the core 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 term. A jury also found Kwon and Terraform liable for securities fraud, with Kwon acknowledging that he was solely responsible for the harm caused. Terraform's lawsuit, filed in January by administrator Todd Snyder, accuses Jane Street of engaging in insider trading that hastened the collapse. Snyder alleges that the firm utilized nonpublic information from Terraform insiders to trade ahead of major 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 pulled out 85 million UST minutes later, sparking widespread 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. Founded in 2018, Terraform Labs filed for bankruptcy in January 2024, and its downfall sent shockwaves throughout the crypto sector, 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.