The bankruptcy administrator overseeing Terraform Labs has filed a lawsuit against Jane Street, claiming the quantitative trading firm conducted insider trading that sped up the multi-billion-dollar downfall of Do Kwon’s Terra-Luna empire in 2022.
Terraform Takes Jane Street To Court
On Monday, Todd Snyder, the court-appointed administrator for Terraform Labs, filed suit in Manhattan federal court against Jane Street, co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang, alleging they “misappropriated confidential information and manipulated market prices.”
The complaint focuses on claims that Jane Street gained material nonpublic information from Terraform insiders and structured trades accordingly as TerraUSD started to drift from its dollar peg, as first reported by The Wall Street Journal on Monday.
“Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,” Todd Snyder alleged in a statement to WSJ.
The administrator said his team intends to “pursue all avenues” against parties who, he alleges, leveraged their positions to secure marked profits to the detriment of Terraform Labs’ creditors.
Suit Claims Jane Street Sold Off Assets Hours Ahead Of Terra’s Meltdown
Snyder’s complaint alleges that Jane Street obtained crucial information enabling it to unwind “hundreds of millions of dollars in potential exposure at precisely the right time, mere hours before the Terraform ecosystem collapsed.”
The filing further states that Jane Street first onboarded Terraform for trading in 2018, but activity involving Terra tokens remained limited until 2022, when Bryce Pratt, a former Terraform intern, resumed contact with former colleagues.
The suit alleges that Pratt established communications with Terraform Labs’ business development lead, a connection that Jane Street allegedly leveraged as “a back-channel source for material non-public information about Terraform,” according to Snyder.
The lawsuit states that on May 7, 2022, Terraform Labs quietly withdrew 150 million TerraUSD tokens from the decentralized stablecoin liquidity pool, Curve3pool, without making an announcement. According to Snyder, just 10 minutes after Terraform’s withdrawal, Jane Street sold 85 million TerraUSD into the same pool—its largest single swap ever—which triggered a fire sale that “ultimately led to the collapse of the Terra ecosystem.”
The lawsuit claims that Jane Street continued leveraging sensitive information to guide trades of the TerraUSD stablecoin during its collapse, generating additional profits, while Pratt facilitated a group chat with Do Kwon.
Jane Street’s Response
Jane Street described the lawsuit as an attempt to extract funds from the firm and pledged to mount a vigorous defense against what it called “baseless, opportunistic claims.”
A spokesperson for Jane Street stated, “This desperate suit is a transparent attempt to extract money, despite it being well-established that the losses suffered by Terra and Luna holders were caused by a multibillion-dollar fraud committed by the management of Terraform Labs.”
Do Kwon Serving 15 Years Behind Bars
Terraform Labs, founded by Do Kwon, collapsed in 2022 after its algorithmic stablecoin TerraUSD lost its dollar peg, sending both TerraUSD and its sister token Luna into a death spiral. The catastrophic meltdown erased a staggering $40 billion from the crypto market and sparked a cascade of bankruptcies across the crypto lending sector.
After failed efforts to rescue the ecosystem, Terraform Labs filed for bankruptcy in January 2024. As part of the bankruptcy proceedings, the company agreed to pay the Securities and Exchange Commission $4.47 billion in penalties. In December, Kwon was sentenced to 15 years in a U.S. prison following his guilty plea to two criminal charges in August.
Source: https://zycrypto.com/terraform-sues-jane-street-for-alleged-insider-trading-that-accelerated-terra-lunas-2022-disastrous-collapse/
