The Terraform Labs bankruptcy administrator has sued quantitative trading firm Jane Street, alleging it used non-public information to profit during the May 2022 collapse of the Terra ecosystem. The complaint, reported by The Wall Street Journal, accuses Jane Street of trading on advance insight into internal liquidity decisions as the stablecoin TerraUSD lost its peg. Legal experts say the case could set a precedent for defining insider liability in decentralized finance markets.
The bankruptcy administrator for Terraform Labs is suing Jane Street, alleging the quantitative trading firm used non-public information to profit during the 2022 crypto market collapse. *The Wall Street Journal* reported the lawsuit centers on claims Jane Street obtained advance insight into Terraform’s liquidity decisions as TerraUSD began losing its dollar peg.
“Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,” administrator Todd Snyder stated. This follows a similar late-December lawsuit filed against trading firm Jump Trading.
Jane Street characterized the suit as a “desperate” attempt to extract money, noting Terraform’s management perpetrated a multibillion-dollar fraud. Attorney Andrew Rossow told Decrypt the case “matters significantly, because the court isn’t just judging a trade anymore; it’s setting a precedent that ‘privileged access’ in DeFi is a legal liability.”
If proven, the allegations could support applying a stricter misappropriation theory in crypto markets. Under this approach, liability could extend to anyone with direct access to a protocol’s confidential crisis communications, not just traditional corporate insiders.
The Terra ecosystem collapsed in May 2022 after TerraUSD depegged, causing its sister token Luna to be nearly wiped out. The roughly $40 billion implosion erased investor value and contributed to a wider industry downturn that included the eventual collapse of FTX.
