High-frequency trading powerhouse Jane Street is accused of insider trading that precipitated the 2022 demise of crypto project Terraform Labs, which destroyed billions of investors’ wealth.
Todd Snyder, the administrator winding up Do Kwon’s Terraform Labs, has sued Jane Street seeking damages from its co-founder Robert Granieri and employees Bryce Pratt and Michael Huang, according to a Wall Street Journal report.
Snyder has accused the trading firm of using material non-public information from Terraform insiders to front-run trading that hastened Terraform’s demise. This means trading on private, price-changing facts before they are public, and then jumping ahead of large orders to make a profit first.
“Jane Street abused market relations to rig the market in its favor during one of the most consequential events in crypto history,” Snyder said in a statement.
“On behalf of injured parties, we will pursue all avenues supported by the facts and the law against those who took advantage of their position and reaped significant profits at the expense of Terraform Labs’ creditors.
Terraform Labs was a Singapore-based blockchain company founded in 2018 by Do Kwon and Daniel Shin, best known for creating the Terra blockchain, it’s native token luna, and the algorithmic stablecoin TerraUSD (UST).
The company filed for bankruptcy in January 2024, with a liquidation fund taking control later that year. Do Kwon was sentenced to 15 years in prison after pleading guilty to two criminal counts in August.
The stablecoin lost its 1:1 USD peg in May 2022, and within days the Luna token also crashed to zero. The result: An astonishing $40 billion in market capitalization evaporated in just one week, leading to massive wealth destruction worldwide. It also led to the collapse of other crypto companies that had exposure to the project.
It all started on May 7, when Terraform quietly raised 150 million TerraUSD from the decentralized stablecoin-focused trading platform Curve3pool. The lawsuit alleges that within 10 minutes before Terraform informed the public of anything, a wallet connected to Jane Street also withdrew 85 million TerraUSD from the same pool. This allegedly triggered the market panic.
Kwon clarified the following day that the 150 million withdrawals were meant to move coins to a new liquidity pool for stablecoins, but it was too late.
Then, on May 9, as TerraUSD began to slide, Jane Street’s Pratt fired off a group chat with Kwon and the team, floating offers to buy bitcoin or Luna. Kwon shot back that Jump co-founder Bill DiSomma should have tipped them off about Terraform’s fundraising push.
Jan Street has called the lawsuit an attempt to extract money from the trading firm, while vowing to vigorously defend against “baseless, opportunistic allegations.”
“This desperate case is a transparent attempt to extract money when it is well established that the losses suffered by Terra and Luna holders were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs,” said a spokesperson for Jane Street.
