Key Points
- Trading firm Jane Street faces legal action from Terraform Labs’ bankruptcy administrator Todd Snyder over alleged insider trading during the 2022 Terra collapse
- The lawsuit alleges Jane Street leveraged confidential information obtained from Terraform insiders to liquidate hundreds of millions in tokens before public disclosure of the crisis
- A wallet connected to Jane Street allegedly sold 85 million TerraUSD into Curve3pool just 10 minutes after Terraform silently removed 150 million TerraUSD from the platform
- According to the complaint, these trades helped catalyze the cascading failure that eliminated $40 billion in market capitalization
- Jane Street has rejected the allegations completely, characterizing the lawsuit as lacking merit and driven by desperation
A court-appointed bankruptcy administrator for Terraform Labs has initiated legal proceedings against Jane Street, a prominent high-frequency trading firm, alleging the company exploited confidential information during the 2022 Terra ecosystem meltdown.
Todd Snyder submitted the legal complaint to Manhattan federal court on Monday. Named as defendants are Jane Street co-founder Robert Granieri along with staff members Bryce Pratt and Michael Huang.
The complaint alleges Jane Street obtained privileged, non-public information through unofficial channels connected to Terraform insiders. The firm purportedly leveraged this intelligence to liquidate substantial positions with precise timing.
Do Kwon and Daniel Shin established Terraform Labs in 2018. The venture developed the Terra blockchain along with TerraUSD, an algorithmic stablecoin engineered to maintain parity with the US dollar.
TerraUSD lost its dollar peg in May 2022. The accompanying Luna token plummeted to nearly worthless in a matter of days. Approximately $40 billion in market capitalization evaporated in less than seven days.
According to the lawsuit, the sequence of events initiated on May 7, 2022, when Terraform discreetly removed 150 million TerraUSD from Curve3pool, a decentralized platform for stablecoin trading, without making any public disclosure.
The 10-Minute Trade
Snyder’s filing states that a wallet associated with Jane Street offloaded 85 million TerraUSD into the identical pool within 10 minutes of that withdrawal. The complaint identifies this transaction as Jane Street’s most substantial single swap on record.
Snyder asserts this particular trade contributed to sparking a panic-driven selloff of TerraUSD that hastened the stablecoin’s demise. The legal filing indicates Jane Street maintained its pattern of trading based on privileged information throughout the token’s continued decline.
The relationship between Jane Street and Terraform originated in 2018, when Terraform brought the firm aboard for trading activities. Transaction volume grew dramatically in 2022 following Bryce Pratt’s renewed contact with his former colleagues from his time as a Terraform intern.
The lawsuit accuses Pratt of establishing a confidential communication pathway with Terraform’s business development lead, characterizing it as a “back-channel source for material non-public information.”
Do Kwon’s Involvement
As TerraUSD’s value declined on May 9, Pratt sent a group communication to Do Kwon and his team proposing to purchase Bitcoin or Luna. Kwon’s reply mentioned Jump Trading co-founder Bill DiSomma and referenced the firm’s capital-raising efforts.
Terraform Labs entered bankruptcy proceedings in January 2024. Authorities subsequently arrested Do Kwon, who entered guilty pleas to two fraud charges. A court sentenced him to 15 years of imprisonment in December 2024.
Snyder’s legal action seeks monetary damages, disgorgement of profits, and interest from Jane Street through a jury trial.
Jane Street has categorically rejected all allegations. A company spokesperson stated: “This desperate suit 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 multibillion-dollar fraud perpetrated by the management of Terraform Labs.”
Manhattan federal court is presiding over the proceedings.
