Jane Street Seeks Dismissal of Terraform Labs Lawsuit Over UST-LUNA Collapse

Jane Street has filed a motion to dismiss a lawsuit brought by the bankruptcy estate of Terraform Labs, denying allegations that the trading firm accelerated the collapse of the TerraUSD (UST) stablecoin and its sister token, Luna. In filings submitted to the Southern District of New York, Jane Street and several employees urged the court to dismiss the complaint with prejudice, which would permanently bar Terraform from pursuing the same claims. The legal dispute centers on the 2022 crash that erased approximately $40 billion in market value. Terraform's administrator, Todd Snyder, alleges that Jane Street engaged in insider trading by utilizing nonpublic information from Terraform insiders to trade ahead of major liquidity shifts. Specifically, the complaint claims that on May 7, 2022, a wallet linked to Jane Street withdrew 85 million UST just minutes after Terraform withdrew 150 million UST, an action that allegedly sparked market panic. Jane Street has strongly disputed this narrative, asserting that the collapse was the direct result of a fraud scheme orchestrated by Terraform Labs. The firm argued that the core issues have already been settled in court, pointing to the criminal and civil cases against Terraform founder Do Kwon. Kwon, who pleaded guilty to conspiracy and wire fraud, is currently serving a 15-year prison sentence and has previously stated he was solely responsible for the losses. While the outcome of the motion will not likely impact current asset prices, the court's decision could shape the legal framework for assigning responsibility in the wake of algorithmic stablecoin failures and the recovery of assets for bankruptcy estates.