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

Jane Street has filed a motion with a US court to dismiss a lawsuit brought by Terraform Labs' bankruptcy estate, contesting allegations that the firm contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. In court filings submitted on Thursday, Jane Street and its employees argued that the case is an attempt to shift responsibility for the Terra ecosystem's failure, which resulted in the loss of approximately $40 billion in value. The firm is seeking a dismissal with prejudice, which would prevent Terraform from pursuing the same claims in the future. According to Jane Street, the lawsuit is an attempt to 'extract cash' to compensate for a fraud perpetrated by Terraform itself. The firm pointed out that the core issues surrounding Terra's collapse have already been settled in court, citing criminal and civil cases against Terraform founder Do Kwon, who has been convicted of conspiracy and wire fraud and is 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 by administrator Todd Snyder in January, alleges that Jane Street engaged in insider trading, using nonpublic information from Terraform insiders to trade ahead of major moves, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg. However, Jane Street disputes this narrative, denying 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.