Jane Street asks court to reject Terraform claims tied to UST-LUNA crash

Decryptnews reports that a recent filing argues the lawsuit revisits matters already resolved by the judiciary, seeking compensation for losses attributed to internal wrongdoing.

Key Points:

— Jane Street has petitioned a federal judge to dismiss Terraform Labs’ bankruptcy lawsuit, contending it aims to divert attention from the 2022 collapse of the TerraUSD stablecoin and Luna token.

— The trading firm asserts that Terraform’s fraudulent activities have already been addressed through criminal and civil proceedings against founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and was sentenced to 15 years in prison.

— Terraform’s estate claims Jane Street exploited insider information to trade ahead of significant UST transactions, including large withdrawals that preceded the stablecoin’s depegging, which Jane Street denies as the court considers responsibility for the $40 billion collapse.

Jane Street has requested a U.S. court to dismiss a lawsuit filed by the bankruptcy estate of Terraform Labs, rejecting allegations that the trading firm contributed to the 2022 collapse of the TerraUSD (UST) stablecoin and its associated token Luna.

In two submissions to the Southern District of New York, Jane Street and several employees argued that the case is an effort to shift blame for the failure of the Terra ecosystem, which wiped out approximately $40 billion in value within days.

The firm urged the court to dismiss the complaint with prejudice, which would bar Terraform from re-litigating 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 defendants wrote.

Jane Street argued that the core issues behind Terra’s collapse have already been resolved in court. It referenced criminal and civil cases against Terraform founder Do Kwon, who pleaded guilty to conspiracy and wire 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 stated he was “alone responsible for everyone’s pain.”

Terraform’s lawsuit, filed in January by administrator Todd Snyder, accuses Jane Street of insider trading that accelerated the collapse. Snyder alleges the firm used nonpublic 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 claims Terraform withdrew 150 million UST on May 7, 2022, and that a wallet linked to Jane Street pulled 85 million UST minutes later, sparking market panic. Jane Street disputes that narrative and denies any role in the collapse.

Jane Street maintains that “Terraform’s fraud scheme — in which Jane Street had no involvement — has already been prosecuted, adjudicated, and punished.”

Terraform Labs, founded in 2018, filed for bankruptcy in January 2024. Its downfall rippled across the crypto sector, contributing to failures at several firms exposed to the project. The court’s decision on Jane Street’s motion could shape how responsibility for that collapse is assigned.