Jane Street Seeks Dismissal of Terraform Lawsuit Over 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 contributed to the 2022 collapse of the TerraUSD stablecoin and its associated token, Luna. In filings submitted to the Southern District of New York, Jane Street and its employees contend that the lawsuit is an effort to deflect blame for the failure of the Terra ecosystem, which resulted in the loss of approximately $40 billion in value over a few days. The firm has requested that the court 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 hold the firm financially responsible for a fraud perpetrated by Terraform itself. The company argues that the key 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 his responsibility for the harm caused. Terraform's lawsuit, filed by administrator Todd Snyder in January, alleges that Jane Street engaged in insider trading, utilizing non-public information from Terraform insiders to execute trades prior to significant market movements. However, 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 participation, has already been prosecuted, adjudicated, and punished. Terraform Labs, established in 2018, 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 may influence how responsibility for the collapse is ultimately assigned.