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, which alleges that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token Luna. In court filings, Jane Street argued that the case is an attempt to shift responsibility for the Terra ecosystem's failure, which wiped out approximately $40 billion in value. The firm is seeking to have the complaint dismissed with prejudice, preventing Terraform from pursuing the same claims in the future. Jane Street contends that the core issues surrounding Terra's collapse have already been resolved in court, citing cases against Terraform founder Do Kwon, who has been found guilty of conspiracy and wire fraud and is currently serving a 15-year prison sentence. The firm also pointed to a jury verdict that found Kwon and Terraform liable for securities fraud. According to Jane Street, Kwon has acknowledged being 'alone responsible for everyone's pain.' The lawsuit, filed by Terraform administrator Todd Snyder in January, accuses Jane Street of engaging in insider trading that accelerated the collapse of the Terra ecosystem. Snyder alleges that Jane Street used non-public information from Terraform insiders to trade ahead of major market moves, including large withdrawals from the Curve liquidity pool that preceded the UST stablecoin 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 have significant implications for how responsibility for the collapse is assigned.