Terraform Files Lawsuit Against Jane Street Over UST Collapse

• The complaint says Jane Street Group sold $85M UST after a confidential liquidity withdrawal.

• Terraform Labs claims front-running worsened UST’s depeg and deepened losses.

• The TerraUSD and LUNA crash erased $40B, expanding scrutiny of major crypto trading firms.

The bankruptcy administrator of Terraform Labs, Todd Snyder, filed a lawsuit Monday in Manhattan federal court against Jane Street Group. The complaint alleges insider trading and front-running trades that profited from non-public information, contributing to the May 2022 collapse of TerraUSD (UST) and LUNA. The suit also names Jane Street co-founder Robert Granieri and employees Bryce Pratt and Michael Huang.

Alleged Insider Trading and Market Manipulation

The lawsuit claims Jane Street executed an $85 million UST sale minutes after a confidential liquidity withdrawal by Terraform Labs. Snyder said these trades worsened the UST peg while protecting Jane Street from losses.

Allegedly, Jane Street gained access to Terraform internal decisions, including liquidity pool withdrawals, which allowed front-running trades. The complaint seeks damages for creditors and holds Jane Street accountable for intensifying the Terra-LUNA crisis, according to The Wall Street Journal.

Terraform’s collapse erased roughly $40 billion in market value. UST lost its dollar peg, and LUNA plunged to near zero within days. Investigations previously examined Telegram chats among Jump Trading, Jane Street, and Alameda Research, probing whether communication constituted market manipulation prior to the collapse.

Broader Context and Community Response

Terraform’s administrator has also filed a $4 billion claim against Jump Trading for alleged market manipulation tied to the UST rescue plan. The lawsuits expand scrutiny on trading firms involved in the collapse.

The broader Terra community welcomed the Jane Street filing, citing past losses and ongoing impacts on investors. Community members noted the case could influence how insider liability rules develop in decentralized markets, amid ongoing discussions around the CLARITY Act.

The case continues Terraform’s legal efforts to recover value for creditors while addressing alleged misconduct that played a role in one of crypto’s most consequential failures.