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US Terra Collapse: New Lawsuit Against Jane Street Alleges Insider Trading

A significant development has emerged from the Terraform Labs case, which is currently in bankruptcy and liquidation proceedings.

Todd Snyder, the liquidator of Terraform Labs, has filed a lawsuit against Jane Street, a prominent U.S. market maker, accusing the firm of insider trading that contributed to the collapse of Terra-Luna.

Snyder claims that Jane Street had access to confidential information from Terraform Labs and used it to pre-order shares, thus manipulating the market.

He stated, “Jane Street abused market relations to manipulate the market to its advantage in one of the most significant events in crypto history.”

The lawsuit points to a critical transaction on May 7, 2022, when Terraform Labs withdrew $150 million UST from Curve Pool 3, followed closely by an $85 million withdrawal from a wallet linked to Jane Street.

This timing raises concerns about the nature of Jane Street's activities and is alleged to have resulted in illicit profits that accelerated Terraform Labs' downfall.

In response, Jane Street has denied the allegations, attributing losses to alleged fraud by Terraform’s management and pledging to robustly defend against the lawsuit.

The Terra crisis, initiated in May 2022 when the UST stablecoin lost its peg to the dollar, spiraled into a broader catastrophe, culminating in the collapse of FTX and Terraform Labs filing for bankruptcy in January 2024.

As the legal battles unfold, the implications of these lawsuits could have lasting repercussions on the crypto landscape and regulatory approaches in the U.S.

The situation remains fluid, and observers are keenly watching how these allegations and defenses will play out in court.