Jane Street Seeks Dismissal of Terraform Lawsuit Tied 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 played a role in the 2022 collapse of TerraUSD (UST) and its associated token, Luna. In two 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 failure of the Terra ecosystem, which resulted in the loss of approximately $40 billion in value over several days. The firm 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's estate to 'extract cash' and shift responsibility for a fraud perpetrated by Terraform itself. The company argues 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. Furthermore, a jury has found Kwon and Terraform liable for securities fraud. Jane Street disputes the narrative presented in Terraform's lawsuit, which alleges that the firm engaged in insider trading that accelerated the collapse of UST and Luna. The lawsuit, filed in January by administrator Todd Snyder, claims that Jane Street used nonpublic 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. Jane Street denies any involvement in the collapse, maintaining that 'Terraform's fraud scheme - in which Jane Street had no involvement - has already been prosecuted, adjudicated, and punished.' The collapse of Terraform Labs, founded in 2018, has had far-reaching consequences for the crypto sector, contributing to the failure of several firms exposed to the project. The court's decision on Jane Street's motion may have significant implications for how responsibility for the collapse is ultimately assigned.