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

Jane Street has requested that a US court dismiss a lawsuit filed by the Terraform Labs bankruptcy estate, denying allegations that the trading firm contributed to the 2022 collapse of the TerraUSD (UST) stablecoin and its associated token, Luna. In Thursday's court filings, Jane Street and its employees argued that the lawsuit 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 is seeking a dismissal with prejudice, which would prevent Terraform from pursuing the same claims in the future. Jane Street contends that the case is an effort by Terraform Labs' estate to hold the company accountable for a fraud perpetrated by Terraform itself. The defendants stated, 'This case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to compensate for a fraud that Terraform itself perpetrated on the market.' The company pointed out that the key issues surrounding Terra's collapse have already been settled 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. According to the filing, Kwon acknowledged being 'alone responsible for everyone's pain.' Terraform's lawsuit, filed in January by administrator Todd Snyder, alleges that Jane Street engaged in insider trading, which accelerated the collapse. Snyder claims that the firm used non-public information from Terraform insiders to trade ahead of significant moves, including large 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 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.