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

Jane Street has petitioned a US court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, contesting claims that the trading firm contributed to the 2022 downfall of the TerraUSD stablecoin and its affiliated token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees argue that the case is an attempt to deflect blame for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value over several days. The company has urged 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 company liable for a fraud perpetrated by Terraform itself. The firm maintains that the core issues surrounding Terra's collapse have already been resolved in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been convicted of conspiracy and wire fraud and is currently serving a 15-year prison sentence. A jury has also found Kwon and Terraform liable for securities fraud. Jane Street argues that Kwon has acknowledged responsibility for the harm caused, stating he was 'alone responsible for everyone's pain.' The lawsuit filed by Terraform administrator Todd Snyder in January accuses Jane Street of insider trading, alleging that the company used confidential 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. For instance, the complaint claims that Terraform withdrew 150 million UST on May 7, 2022, and 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 company 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 crypto sector, contributing to the failure of several firms exposed to the project. The court's decision on Jane Street's motion could influence how responsibility for the collapse is assigned.