Jane Street Faces $40B Terra Insider Trading Lawsuit

The financial turmoil surrounding the $40 billion Terra-Luna collapse has entered a new chapter. A significant lawsuit has been filed against Jane Street Group LLC, a prominent trading firm on Wall Street. This case challenges the narrative surrounding the infamous crypto market’s failure and its implications for both the firm and retail investors.

Key Details of the Lawsuit Against Jane Street

The lawsuit was initiated on February 23, 2023, by Todd R. Snyder, the administrator overseeing the bankruptcy of Terraform Labs. The complaint seeks to uncover whether Jane Street possessed advanced knowledge about the impending downfall of Terra-Luna.

Allegations Against Jane Street

• The lawsuit accuses Jane Street of using privileged information to profit from the collapse.
• Claims include violations of the Commodity Exchange Act and Securities Exchange Act.
• Snyder is requesting damages, disgorgement, interest, and is demanding a jury trial in the Southern District of New York (Case No. 1:26-cv-1504).

The Critical 10-Minute Window

An exclusive report by the Wall Street Journal highlighted a crucial moment on May 7, 2022. On that day, Terraform Labs withdrew a significant amount of 150 million TerraUSD from the Curve3pool. Within just ten minutes, Jane Street allegedly withdrew 85 million TerraUSD from the same pool.

• This swift series of transactions is labeled as Jane Street’s largest single swap.
• The lawsuit claims this quick action contributed heavily to the loss of market confidence in TerraUSD, leading to a decline of $40 billion in value.

Background on Jane Street and Terraform Labs

Jane Street has had ties with Terraform since 2018, functioning as a liquidity and market-making partner. However, their activities reportedly intensified in 2022. Bryce Pratt, a former Terraform intern, reestablished contact with his old colleagues, leading to alleged private communications containing sensitive non-public information.

As the case unfolds, it raises critical questions about market ethics and the responsibilities of trading firms in the crypto market. If the allegations against Jane Street are proven true, it could significantly alter the perception of their role during the Terra collapse.