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

Jane Street has filed a motion with a US court to dismiss a lawsuit brought by the bankrupt Terraform Labs, contesting claims that the trading firm played a role in the 2022 collapse of the TerraUSD stablecoin and its associated token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees contend that the lawsuit is an effort to deflect responsibility for the failure of the Terra ecosystem, which resulted in the loss of approximately $40 billion in value over a short period. The firm has requested that the court dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. Jane Street maintains that the core issues surrounding Terra's collapse have already been resolved in court, citing cases against Terraform founder Do Kwon, who has been found guilty of conspiracy and wire fraud and is currently serving a 15-year prison sentence. According to the filing, Kwon has acknowledged being 'alone responsible for everyone's pain.' The lawsuit, filed by Terraform administrator Todd Snyder in January, alleges that Jane Street engaged in insider trading, utilizing non-public information from Terraform insiders to execute trades ahead of significant 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 85 million UST minutes later, sparking market panic. Jane Street disputes this narrative and denies any involvement in the collapse. The firm asserts 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 cryptocurrency 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 assigned.