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

Jane Street has requested a US court to reject a lawsuit filed by the bankruptcy estate of Terraform Labs, denying allegations that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. In court filings submitted on Thursday, Jane Street and its employees argued that the case is an attempt to deflect responsibility for the Terra ecosystem's failure, which wiped out approximately $40 billion in value within a matter of days. The firm urged the court to dismiss the complaint with prejudice, preventing Terraform from pursuing the same claims in the future. According to Jane Street, 'this case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to cover the costs of a fraud that Terraform itself perpetrated on the market.' The firm pointed out 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 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 in January by administrator Todd Snyder, accuses Jane Street of insider trading that accelerated the collapse. Snyder alleges that the firm used confidential information from Terraform insiders to trade ahead of major 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 maintains 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 failures 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.