Jane Street Files Motion to Dismiss Terraform Labs' Insider Trading Lawsuit

Gate News message, April 24 — Jane Street and several individual defendants have filed a motion with the U.S. District Court for the Southern District of New York seeking to dismiss the insider trading lawsuit brought by Terraform Labs' bankruptcy estate. The quant firm argues that Terraform is attempting to shift blame for the collapse of the Terra-Luna ecosystem onto Jane Street rather than accepting responsibility for its own fraud.

"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 stated in their filing. Jane Street requested the court dismiss the entire lawsuit with prejudice, preventing Terraform from refiling identical claims. The firm contends that much of the case has already been litigated, noting that Terraform founder Do Kwon pleaded guilty to conspiracy and wire fraud charges in December and is currently serving a 15-year prison sentence, while a jury found Terraform and Kwon civilly liable for securities fraud.

Concerning the insider trading allegations, Jane Street argued that Terraform's claims are "self-defeating" because the firm's largest trades occurred after material information about UST/LUNA's health became public. Jane Street began acquiring a short position on May 8 and sold assets on May 7, but the filing notes that Terraform has failed to identify "information that was material or non-public" or point to specific "back-channel communications" demonstrating improper information advantage. The filing also cited the "Wagoner rule," which prevents bankruptcy estates from suing third parties to recover losses caused by their own fraud, and argued the claims are impermissibly extraterritorial since Terraform did not prove the trades occurred in the U.S.