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 bankruptcy estate of Terraform Labs, contesting claims that the trading firm contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token, Luna. The firm submitted two filings to the Southern District of New York, stating that the case is an attempt to deflect blame for the failure of the Terra ecosystem, which resulted in the loss of approximately $40 billion in value over several days. Jane Street urged the court to dismiss the complaint with prejudice, preventing Terraform from pursuing the same claims in the future. The defendants argued that the case is an attempt by Terraform Labs' estate to hold Jane Street liable for a fraud perpetrated by Terraform itself. Jane Street 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 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, 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. 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 significantly impact how responsibility for the collapse is assigned.