CoinDesk
Jane Street asked a federal judge Thursday to dismiss Terraform Labs' bankruptcy lawsuit accusing the trading firm of helping trigger the 2022 collapse of the TerraUSD stablecoin and its sister token Luna, an event that erased roughly $40 billion in value within days.
In two filings submitted to the Southern District of New York, Jane Street and several named employees argued the complaint is an attempt to shift blame for Terraform's own internal fraud. The defendants urged the court to dismiss the case with prejudice, which would prevent Terraform's estate from refiling the same claims. "This case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market," the firm wrote.
Why it matters
Terraform's lawsuit, filed in January by bankruptcy administrator Todd Snyder, alleges Jane Street used nonpublic information from Terraform insiders to trade ahead of major UST moves, including a Curve liquidity pool withdrawal on May 7, 2022 that preceded the stablecoin's depeg. The complaint points to a wallet linked to Jane Street that pulled 85 million UST minutes after Terraform withdrew 150 million UST from the same pool. Jane Street denies the narrative and disputes the implication of any role in the collapse.
The trading firm also pointed to prior adjudication: Terraform founder Do Kwon pleaded guilty to conspiracy and wire fraud and is serving a 15-year prison sentence, while a jury found Kwon and Terraform liable for securities fraud. Kwon has said he was "alone responsible for everyone's pain," a line Jane Street's filing leaned on to argue the matter is closed.
Market impact
The motion will shape how courts assign responsibility for one of crypto's largest-ever failures, which propagated through lenders and funds exposed to the Terra ecosystem. A dismissal with prejudice would foreclose Terraform's estate from recovering damages from Jane Street and could narrow the playbook for creditors chasing third parties in crypto bankruptcies. The estate's path forward depends on whether the judge allows the insider-trading theory to survive early review.
Frequently asked questions
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What is Jane Street asking the court to do in the Terraform lawsuit?
Jane Street filed two motions Thursday in the Southern District of New York asking the judge to dismiss Terraform Labs' bankruptcy lawsuit with prejudice, which would prevent the estate from refiling the same insider-trading claims.
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What does Terraform's estate allege Jane Street did?
The complaint, filed in January by bankruptcy administrator Todd Snyder, alleges Jane Street used nonpublic information to trade ahead of major UST moves, including pulling 85M UST from a Curve pool minutes after Terraform withdrew 150M UST on May 7, 2022.
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Why does Jane Street say the case should be thrown out?
Jane Street argues the Terraform collapse has already been adjudicated through the criminal case against founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and is serving a 15-year prison sentence.
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How much value was lost in the UST-LUNA collapse?
The collapse of the TerraUSD stablecoin and its sister token Luna erased roughly $40 billion in value within days in May 2022, triggering failures at several crypto firms exposed to the Terra ecosystem.
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What is the significance of a dismissal with prejudice?
A dismissal with prejudice would prevent Terraform's bankruptcy estate from pursuing the same insider-trading claims against Jane Street again, foreclosing that path to creditor recovery and potentially narrowing how crypto estates can pursue third-party defendants.
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