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 Terraform Labs bankruptcy estate, denying allegations that the trading firm contributed to the 2022 collapse of TerraUSD (UST) and its sister 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 responsibility for the Terra ecosystem's demise, which wiped out approximately $40 billion in value. The firm is seeking a dismissal with prejudice, which would prevent Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an attempt to 'extract cash' to compensate for a fraud perpetrated by Terraform. The company points out that the core issues surrounding Terra's collapse have already been resolved in court, citing 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'. Terraform's lawsuit, filed by administrator Todd Snyder in January, accuses Jane Street of insider trading that accelerated the collapse. Snyder claims that the firm used confidential information from Terraform insiders to trade ahead of significant events, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg. For instance, the complaint alleges 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 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 had a ripple effect across the crypto sector, contributing to the failures of several firms exposed to the project. The court's decision on Jane Street's motion could significantly impact how responsibility for the collapse is assigned.