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

Jane Street has petitioned a US court to throw out a lawsuit filed by the bankrupt Terraform Labs, denying allegations that it contributed to the 2022 implosion of the TerraUSD stablecoin and its companion token, Luna. In two Thursday filings to the Southern District of New York, Jane Street and its employees argued that the case is a ploy to redirect accountability for the Terra ecosystem's failure, which wiped out approximately $40 billion in value within a matter of days. The firm is urging the court to dismiss the complaint with prejudice, thereby preventing Terraform from pursuing identical claims in the future. According to Jane Street, 'this case is an attempt by Terraform Labs' estate to extort money from Jane Street to cover the costs of a fraud that Terraform itself perpetrated on the market.' The company maintained that the core issues surrounding Terra's collapse have already been resolved in court, referencing the criminal and civil cases against Terraform founder Do Kwon, who is currently serving a 15-year prison sentence after pleading guilty to conspiracy and wire fraud. 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 in January by administrator Todd Snyder, accuses Jane Street of insider trading that accelerated the collapse. Snyder claims that Jane Street utilized non-public information from Terraform insiders to trade ahead of significant moves, including substantial 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, 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.' 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.