TLDR
- Todd Snyder, the bankruptcy administrator for Terraform Labs, has initiated legal action against Jane Street, alleging insider trading during Terra’s 2022 collapse
- The trading firm allegedly leveraged confidential information obtained from Terraform insiders to offload hundreds of millions worth of tokens prior to the public crash
- Just 10 minutes after Terraform discreetly withdrew 150 million TerraUSD from a liquidity pool, a Jane Street-associated wallet dumped 85 million TerraUSD into that same pool
- The legal complaint alleges this transaction sparked the catastrophic downward spiral that eliminated $40 billion in market capitalization
- Jane Street has rejected all accusations, labeling the lawsuit as “baseless” and “desperate”
A court-appointed bankruptcy administrator for Terraform Labs has initiated legal proceedings against Jane Street, a prominent high-frequency trading operation, alleging the firm exploited confidential information to execute strategic trades before the Terra ecosystem’s 2022 implosion.
Todd Snyder submitted the legal complaint to Manhattan federal court this past Monday. Named as defendants are Jane Street’s co-founder Robert Granieri along with staff members Bryce Pratt and Michael Huang.
The complaint asserts that Jane Street obtained privileged, confidential information through unofficial channels connected to Terraform insiders. The firm is alleged to have leveraged this intelligence to liquidate substantial holdings with remarkably precise timing.
Do Kwon and Daniel Shin established Terraform Labs in 2018. The organization developed the Terra blockchain along with TerraUSD, an algorithmic stablecoin engineered to maintain parity with the US dollar at a 1:1 ratio.
TerraUSD lost its dollar peg in May 2022. Luna, the accompanying token, plummeted to virtually nothing in a matter of days. Approximately $40 billion in market capitalization evaporated in less than seven days.
According to the legal filing, the sequence of events commenced on May 7, 2022, when Terraform discreetly removed 150 million TerraUSD from Curve3pool, a decentralized platform for stablecoin exchange, without issuing any public notification.
The 10-Minute Trade
Snyder’s complaint states that merely 10 minutes following that removal, a cryptocurrency wallet connected to Jane Street dumped 85 million TerraUSD into the identical pool. The lawsuit characterizes this as Jane Street’s most significant single transaction ever executed.
Snyder contends this transaction helped initiate a panic sale of TerraUSD that hastened the stablecoin’s demise. The legal action asserts Jane Street maintained its trading activity based on privileged information as the token’s value continued plummeting.
The relationship between Jane Street and Terraform dates to 2018, when Terraform brought the firm aboard for trading operations. Trading volume intensified dramatically in 2022 following Bryce Pratt, a former Terraform intern, reestablishing contact with his previous associates.
Pratt stands accused of establishing a private messaging channel with Terraform’s business development director, which the lawsuit characterizes as a “back-channel source for material non-public information.”
Do Kwon’s Involvement
On May 9, as TerraUSD began declining, Pratt transmitted a group communication to Do Kwon and his associates proposing to purchase Bitcoin or Luna. Kwon’s reply mentioned Jump Trading’s co-founder Bill DiSomma and the company’s capital-raising initiatives.
Terraform submitted its bankruptcy filing in January 2024. Do Kwon faced arrest subsequently and entered guilty pleas to two fraud charges. He received a 15-year prison sentence in December 2024.
Snyder is pursuing monetary damages, disgorgement of profits, and interest from Jane Street through a jury trial.
Jane Street has categorically denied the allegations. A company representative 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 legal proceedings are taking place in Manhattan federal court.
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