Jane Street Seeks Dismissal of Terraform Lawsuit Over TerraUSD Collapse

Jane Street has asked a U.S. court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, pushing back against allegations that the trading firm played a role in the dramatic 2022 collapse of the TerraUSD (UST) stablecoin and its sister token, Luna. In filings submitted to the Southern District of New York, the firm and several of its employees argued that the case is an attempt to redirect responsibility for one of the crypto market’s largest failures.

The lawsuit stems from the implosion of the Terra ecosystem, which wiped out approximately $40 billion in market value within days and triggered a broader crisis across the cryptocurrency industry. Jane Street contends that Terraform Labs is trying to recover losses by targeting external parties rather than acknowledging its own role in the collapse.

According to Jane Street, the core issues behind the TerraUSD crash have already been addressed in prior legal proceedings. The firm highlighted 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 both Kwon and Terraform Labs liable for securities fraud, reinforcing the firm’s argument that responsibility has already been legally determined.

Terraform Labs’ complaint, filed in January 2024 by bankruptcy administrator Todd Snyder, accuses Jane Street of insider trading. The lawsuit claims the firm used nonpublic information to execute trades ahead of key events, including large liquidity withdrawals that contributed to UST losing its dollar peg. One example cited involves Terraform withdrawing 150 million UST from a Curve pool, followed by an alleged 85 million UST withdrawal by a wallet linked to Jane Street.

Jane Street strongly denies these allegations, maintaining it had no involvement in Terraform’s operations or its alleged fraud scheme. The firm has requested that the court dismiss the case with prejudice, which would prevent Terraform from filing similar claims in the future. The outcome of this motion could significantly influence how legal responsibility for the TerraUSD collapse is ultimately assigned.