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 Terraform Labs bankruptcy estate, contesting allegations that the trading firm contributed to the 2022 downfall of the TerraUSD stablecoin and its companion token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees argued that the case is a misguided attempt to deflect responsibility for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value over several days. The firm requested that the court dismiss the complaint with prejudice, thereby preventing Terraform from pursuing the same claims in the future. Jane Street characterized the lawsuit as an effort by Terraform Labs' estate to hold the firm financially responsible for a fraud perpetrated by Terraform itself. The company 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 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.' The lawsuit, filed by administrator Todd Snyder in January, accuses Jane Street of insider trading that accelerated the collapse. Snyder alleged that the firm utilized non-public 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, triggering market panic. Jane Street disputes this narrative and denies any involvement in the collapse. The company maintains 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 cryptocurrency 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.