Jane Street Seeks Dismissal of Terraform Lawsuit Linked to UST-LUNA Collapse

Jane Street has petitioned a US court to reject a lawsuit filed by Terraform Labs' bankruptcy estate, disputing allegations that the 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 lawsuit is an attempt to shift responsibility for the Terra ecosystem's collapse, which wiped out approximately $40 billion in value. The firm 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 effort by Terraform Labs' estate to hold the firm financially responsible for a fraud perpetrated by Terraform itself. The defendants contended that the primary issues surrounding Terra's collapse have already been resolved 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, with Kwon acknowledging that he was 'alone responsible for everyone's pain.' Terraform's lawsuit, filed in January by administrator Todd Snyder, accuses Jane Street of insider trading that accelerated the collapse. Snyder alleges that the firm utilized nonpublic information from Terraform insiders to trade ahead of significant events, 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 influence how responsibility for the collapse is assigned.