Hassan Maishera
TL;DR
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Terraform Labs sued Jane Street for alleged insider trading prior to the Terra-Luna collapse in 2022.
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The trading firm argues the lawsuit is an attempt to shift blame for a fraud that has already been prosecuted.
Jane Street Seeks Dismissal of Terraform Labs' Insider Trading Lawsuit
Jane Street has moved to dismiss a lawsuit filed by former crypto giant Terraform Labs, which accuses the trading firm of helping trigger the collapse of the UST/LUNA algorithmic stablecoin ecosystem.
In a filing submitted to the United States District Court for the Southern District of New York, Jane Street and several individual defendants argued that the lawsuit is an attempt by Terraform’s bankruptcy estate to shift responsibility for the implosion of the Terra-Luna ecosystem onto outside parties.
Jane Street wrote that,
“This case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.”
The trading firm asked the court to dismiss the lawsuit with prejudice, which would prevent Terraform from refiling the same claims in the future.
Jane Street argued that the underlying issues surrounding the Terra collapse have already been litigated extensively and maintained that Terraform’s own conduct — rather than any actions by Jane Street — caused the disaster.
According to the filing, “Terraform’s fraud scheme — in which Jane Street had no involvement — has already been prosecuted, adjudicated, and punished.”
Terraform founder Do Kwon pleaded guilty in December to conspiracy and wire fraud charges and is currently serving a 15-year prison sentence.
Separately, a jury previously found both Terraform Labs and Kwon civilly liable for securities fraud. The filing also referenced statements in which Kwon allegedly admitted he was “alone responsible for everyone’s pain.”
Jane Street further rejected allegations of insider trading and market manipulation, calling the claims “self-defeating.” The firm argued that many of its largest trades occurred only after important information about the condition of the UST/LUNA ecosystem had already become public knowledge.
While Jane Street acknowledged building a significant short position on May 8 and selling assets on May 7, the company argued that Terraform failed to identify any material non-public information or evidence of private communications that would have given the firm an unfair trading advantage.
Jane Street’s filing also invoked the “Wagoner rule,” a legal doctrine that can prevent bankruptcy estates from suing third parties for losses tied to the debtor’s own fraudulent conduct.
Finally, the firm argued that Terraform’s claims may be impermissibly extraterritorial because the company failed to prove that the disputed trades occurred within the United States.
