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

Jane Street has petitioned a US court to dismiss a lawsuit filed by the Terraform Labs bankruptcy estate, contesting allegations that the trading firm played a role in the 2022 collapse of the TerraUSD stablecoin and its companion token, Luna. In two filings submitted to the Southern District of New York, Jane Street and several of its employees asserted 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 the course of several days. The firm has urged the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. According to the defendants, 'this case represents an attempt by the Terraform Labs estate to obtain compensation from Jane Street for a fraud perpetrated by Terraform itself.' Jane Street maintains that the primary 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 term. A jury also found Kwon and Terraform liable for securities fraud. In the filing, it is noted that Kwon acknowledged being 'alone responsible for everyone's pain.' The lawsuit filed by Terraform in January, led by administrator Todd Snyder, accuses Jane Street of engaging in insider trading that accelerated the collapse. Snyder alleges that the firm utilized nonpublic information obtained from Terraform insiders to trade ahead of significant market movements, 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 85 million UST minutes later, triggering market panic. Jane Street disputes this narrative and denies any involvement in the collapse. The firm emphasizes 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 had a ripple effect throughout the crypto sector, contributing to the failures of several firms exposed to the project. The court's decision on Jane Street's motion may influence how responsibility for the collapse is ultimately assigned.