Jane Street, one of the world’s leading trading firms, has petitioned the U.S. Southern District Court of New York to dismiss a lawsuit filed against it by the bankrupt Terraform Labs. Jane Street’s attorneys argued that the company had no responsibility in the sudden collapse of TerraUSD (UST) and Luna tokens in 2022, an event that wiped nearly $40 billion from the market.
Legal proceedings and Jane Street’s defense
In two separate motions submitted to the court, Jane Street claimed that Terraform Labs was trying to shift blame for its own losses onto others. The company described the lawsuit as baseless, asserting that previous court rulings had already established the core issues within the Terra ecosystem. The defense maintains that Terraform Labs is unjustly seeking financial restitution from Jane Street through these claims.
The filings referenced criminal and civil proceedings against Terraform Labs founder Do Kwon, noting that Kwon has been convicted on fraud and conspiracy charges and sentenced to a total of 15 years in prison. The documents also highlighted that Kwon and the company were found liable for securities fraud. Jane Street pointed to these facts to emphasize that the mismanagement within the Terra ecosystem originated entirely outside its own operations.
“This lawsuit has become an attempt to make Jane Street pay the price for the massive fraud orchestrated by Terraform Labs,” the defense stated.
Insider trading allegations and the UST collapse
In a suit filed by Terraform Labs in January, represented by executive Todd Snyder, Jane Street was accused of trading with insider information and accelerating the collapse of the Terra ecosystem. Terraform Labs claimed Jane Street exploited key information leaked from within the company to conduct large-scale trades. The lawsuit alleges that on May 7, 2022, Jane Street withdrew 85 million UST from a wallet in a short span, triggering panic in the market. Jane Street, however, has categorically denied the allegations.
Jane Street continues to insist that the real responsibility lies with the management of Terraform Labs and that it played no role in the events leading to the ecosystem’s collapse. The defense also stated that related illegal acts and fraud had already been tried and adjudicated.
The bankruptcy of Terra and sector-wide implications
Founded in 2018, Terraform Labs filed for bankruptcy in January 2024. The failure of the Terra project not only brought down the company itself but also severely impacted a range of businesses invested or entangled in its ecosystem. The dramatic loss in the value of UST and Luna triggered a domino effect across the broader cryptocurrency market. The outcome of Jane Street’s court motion may set an important precedent regarding liability when major crypto projects collapse.
The court’s decision is expected to provide guidance on the degree to which various parties can be held accountable in future cases with similar circumstances. This may lead to a new legal approach for lawsuits brought in the aftermath of major failures within the crypto sector.
The ongoing legal dispute between Terraform Labs and Jane Street could serve as a reference point for assigning responsibility in future crises involving similar projects.
