Jane Street Seeks Dismissal of Lawsuit Tied to UST-LUNA Collapse

Jane Street has filed a motion to dismiss a lawsuit brought by the bankruptcy estate of Terraform Labs, arguing that the case is an attempt to deflect responsibility for the 2022 collapse of the TerraUSD (UST) stablecoin and its sister token Luna. The firm claims that the lawsuit rehashes events that have already been resolved in court and seeks damages for losses caused by internal misconduct within Terraform. Jane Street and its employees submitted two filings to the Southern District of New York, stating that the case is an attempt to shift the blame for the failure of the Terra ecosystem, which erased approximately $40 billion in value within a matter of days. The company is urging the court to dismiss the complaint with prejudice, preventing Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an attempt to 'extract cash' to cover the costs of a fraud perpetrated by Terraform itself. The firm argues that the core issues behind Terra's collapse have already been settled in court, citing criminal and civil 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. A jury has also found Kwon and Terraform liable for securities fraud. Jane Street disputes the allegations of insider trading, denying any involvement in the collapse of the Terra ecosystem. The company maintains that Terraform's fraud scheme, in which Jane Street had no involvement, has already been prosecuted, adjudicated, and punished. The downfall of Terraform Labs, which filed for bankruptcy in January 2024, has had a significant impact on 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.