Jane Street asked a US court to dismiss a lawsuit filed by Terraform Labs’ bankruptcy estate, rejecting claims that the trading firm helped trigger the 2022 collapse of the TerraUSD (UST) stablecoin and its sister token Luna.
In two filings filed Thursday with the Southern District of New York, Jane Street and several employees said the suit is an attempt to shift blame for the failure of the Terra ecosystem, which wiped out about $40 billion in value within days.
The firm urged the court to dismiss the complaint with prejudice, which would prevent Terraform from pursuing the same claims again.
“This case is an attempt by Terraform Labs’ estate to extract cash from Jane Street to foot the bill for a fraud perpetrated by Terraform itself on the market,” the defendants wrote.
Jane Street argued that the core issues behind Terra’s collapse have already been settled in court. It pointed to criminal and civil cases against Terraform founder Do Kwon, who pleaded guilty to conspiracy and fraud and is serving a 15-year prison sentence. A jury also found Kwon and Terraform liable for securities fraud. According to the filing, Kwon said he was “solely responsible for everyone’s pain.”
Terraform’s lawsuit, filed in January by administrator Todd Snyder, accuses Jane Street of insider trading that precipitated the collapse. Snyder alleges that the firm used non-public 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 example, the complaint alleges that Terraform withdrew 150 million UST on May 7, 2022, and that a wallet linked to Jane Street withdrew 85 million UST minutes later, triggering market panic. Jane Street disputes this narrative and denies any role in the collapse.
Jane Street maintains that “Terraform’s fraud scheme – in which Jane Street was not involved – has already been prosecuted, convicted and punished.”
Founded in 2018, Terraform Labs filed for bankruptcy in January 2024. Its downfall rocked the crypto sector and contributed to the failure of several firms exposed to the project. The court’s ruling on Jane Street’s motion could shape how responsibility for that collapse is assigned.
