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 bankruptcy estate of Terraform Labs, disputing allegations that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees argue that the lawsuit is an attempt to shift the blame 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, which would prevent Terraform from pursuing the same claims in the future. Jane Street contends 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. A jury has 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 alleges that the firm used confidential 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. 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 have significant implications for how responsibility for the collapse is assigned.