The court-appointed administrator for bankrupt Terraform Labs has sued trading firm Jane Street for insider trading. The lawsuit alleges Jane Street used confidential information from Terraform insiders to sell tokens ahead of the ecosystem’s $40 billion collapse. Jane Street has called the claims “baseless” and a transparent money grab.
The administrator overseeing Terraform Labs‘ bankruptcy has accused trading firm Jane Street of insider trading. The lawsuit filed in Manhattan federal court alleges the firm used non-public information to manipulate markets.
The complaint claims Jane Street leveraged connections with Terraform insiders to learn confidential details. It alleges this information allowed the firm to sell “hundreds of millions of dollars” worth of tokens just before the collapse.
Jane Street strongly denied the allegations in a statement. “This desperate suit is a transparent attempt to extract money when it is well-established that the losses… were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs,” the firm stated.
The Terra ecosystem collapsed in May 2022 after its algorithmic stablecoin lost its peg. This triggered a death spiral that erased approximately $40 billion in value.
The lawsuit details that on May 7, 2022, Terraform withdrew 150 million TerraUSD tokens from a liquidity pool. Within ten minutes, Jane Street allegedly sold 85 million TerraUSD into the same pool, initiating a fire sale.
Administrator Todd Snyder is seeking damages and disgorgement from Jane Street via a jury trial. The lawsuit also names Jane Street co-founder Robert Granieri and employees Bryce Pratt and Michael Huang as defendants.
Terraform filed for U.S. bankruptcy in 2024. Its co-founder, Do Kwon, later pleaded guilty to two fraud charges and was sentenced to 15 years in prison.
