The court-appointed official dismantling the remnants of Terraform Labs has filed suit against Jane Street Group, alleging the trading firm leveraged privileged information to profit during the dramatic unraveling of the TerraUSD stablecoin and its sister token, Luna.
Key Takeaways:
- Terraform’s wind-down trust claims Jane Street accessed confidential internal information.
- The suit alleges trades were placed ahead of market-moving liquidity shifts.
- Four defendants are named, including a Jane Street co-founder.
- Jane Street rejects the allegations and says it will contest the claims.
The complaint, lodged Monday in Manhattan federal court by plan administrator Todd Snyder, names Jane Street, co-founder Robert Granieri, and traders Bryce Pratt and Michael Huang. The filing, much of it redacted, seeks damages tied to trading activity in the days surrounding the tokens’ collapse.
Terraform’s implosion in May 2022 erased roughly $40 billion in market value after TerraUSD – an algorithmic stablecoin meant to hold a $1 peg – broke from parity with the dollar. The ensuing spiral drove Luna’s price to near zero and triggered a wider crisis across digital-asset markets, contributing to a chain of failures that later engulfed major firms including FTX.
Communications Under Scrutiny
According to the lawsuit, Jane Street’s relationship with Terraform dates back several years but deepened in early 2022. The complaint alleges that Bryce Pratt, who had previously interned at Terraform, reconnected with former colleagues after joining Jane Street, opening informal channels of communication.
Among the exchanges cited is a private messaging group allegedly used to share updates related to Terraform’s operations. What began as discussions around a potential investment, the suit claims, evolved into a steady flow of nonpublic insights about liquidity decisions and internal strategy.
Snyder contends that Jane Street used that information to anticipate market-sensitive actions, placing trades designed to benefit from the strain on TerraUSD’s peg.
The Curve Pool Transactions
The filing points to events on May 7, 2022, as a pivotal moment. Terraform withdrew 150 million TerraUSD from Curve’s 3pool liquidity platform late that afternoon, according to the complaint. Within minutes, a separate wallet that blockchain analysts have associated with Jane Street removed 85 million TerraUSD from the same pool.
The administrator argues that the proximity and timing of those transactions suggest Jane Street acted with foreknowledge of Terraform’s liquidity maneuver – information that had not yet been disclosed publicly.
The following day, Terraform founder Do Kwon said the withdrawal was part of a broader plan to shift liquidity to a different pool. However, the lawsuit maintains that the specific timing and operational details were not available to the market when the alleged trades occurred.
Terraform sought bankruptcy protection in January 2024, and a wind-down trust was later established to pursue recoveries for creditors. Kwon, who founded the company in 2018, is serving a 15-year prison sentence after pleading guilty last year to two criminal counts.
In a statement, Snyder accused Jane Street of exploiting its position during “one of the most consequential failures in crypto history,” pledging to pursue accountability on behalf of creditors.
Jane Street dismissed the case as an attempt to shift blame for losses it says stemmed from misconduct within Terraform itself. A company spokesperson said the firm intends to fight what it characterized as opportunistic and unfounded claims.
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Source: https://coindoo.com/terraform-liquidator-sues-jane-street-over-terrausd-collapse/