Jane Street Faces Claims of Insider Trading That Accelerated Terraform’s 2022 Collapse

High-frequency trading firm Jane Street is accused of using insider information to profit from the downfall of crypto project Terraform Labs in 2022, a collapse that wiped out billions in investor wealth. The firm has denied the allegations, calling them a “desperate” and “baseless” attempt to extract money.

Todd Snyder, the administrator overseeing the liquidation of Terraform Labs, has filed a lawsuit against Jane Street, naming co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang. The suit alleges that Jane Street leveraged nonpublic information from Terraform insiders to engage in trading practices that hastened the project’s demise .

The Allegations: Front-Running and Market Manipulation

The lawsuit centers around a key event on May 7, 2022, when Terraform Labs quietly withdrew 150 million TerraUSD (UST) from Curve3pool, a decentralized stablecoin-focused trading platform. According to the complaint, within 10 minutes, a wallet linked to Jane Street withdrew 85 million UST from the same pool. This action is alleged to have triggered a market panic, contributing to the loss of UST’s dollar peg and the subsequent collapse of the Luna token .

The claim is that Jane Street engaged in “front-running” – trading on private, price-swinging information before it became public and then profiting from the subsequent market movements. Snyder stated, “Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,” .

Terraform Labs’ Demise and Do Kwon’s Legal Troubles

Terraform Labs, founded in 2018 by Do Kwon and Daniel Shin, was the creator of the Terra blockchain, the Luna token, and the algorithmic stablecoin TerraUSD (UST). The company filed for bankruptcy in January 2024. Do Kwon was sentenced to a 15-year prison term in August after pleading guilty to two criminal counts .

The collapse of UST and Luna in May 2022 resulted in an estimated $40 billion market cap evaporation within a single week, causing widespread financial losses and contributing to the downfall of other crypto companies with exposure to the project .

Jane Street’s Response

Jane Street has vehemently denied the allegations, characterizing the lawsuit as a “transparent attempt to extract money.” A spokesperson for the firm 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” .

The firm intends to vigorously defend itself against what it calls “baseless, opportunistic claims.”