Jane Street Sued: From Terra Luna to IBIT – The Truth Behind Bitcoin's Periodic Crashes

Jane Street is the most profitable quantitative trading firm in Wall Street history, but few people know about its existence—until this week, when the company was accused of insider trading that caused the collapse of Terra Luna, and was also involved in a $560 million index manipulation lawsuit in India.
This article links the allegations of Terra Luna manipulation by Jane Street, market manipulation in India, and the “10 a.m. crash” of Bitcoin every day into a comprehensive investigation chain, with verifiable timelines and data. Bitcoin’s recovery today may be supported by this story.
Jane Street Group is a quantitative trading company based in New York. They do not have a CEO. According to the company itself, they operate as a “decentralized community.”
In just the first nine months of 2025, they recorded a net trading revenue of $24 billion, surpassing the $20.5 billion for all of 2024. In Q2 2025 alone, they achieved $10.1 billion— the highest quarterly trading revenue ever recorded by any Wall Street firm.
By any standard, Jane Street is the most profitable trading company in the world.
This week, Terraform Labs’ bankruptcy manager filed a federal lawsuit in Manhattan, accusing Jane Street of using insider information to profit from the Terra Luna collapse in May 2022. That collapse wiped out $40 billion in value and triggered a chain reaction leading to the downfall of Celsius, Three Arrows Capital, and FTX.
The reasoning behind this accusation is astonishingly simple.

On May 7, 2022, Terraform Labs quietly withdrew $150 million in non-convertible cryptocurrency (UST) from Curve3pool (a large decentralized liquidity pool). No announcement was made; it was just a silent liquidity withdrawal.
Ten minutes later, a wallet linked to Jane Street withdrew $85 million from the same liquidity source. Exactly ten minutes.

The lawsuit alleges that Bryce Pratt, a former intern at Terraform who joined Jane Street as a full-time employee in September 2021, established secret channels with his former colleagues at Terraform. He is suspected of directly transferring non-public, critical information about Terraform’s liquidity activities to Jane Street’s trading division.
The lawsuit names four defendants: Jane Street Group LLC, co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang.
The bankruptcy manager’s statement hits the core issue: “Trades executed by Jane Street would not have been possible without exclusive access to insider information.”
Even worse, the lawsuit claims that Jane Street’s divestment contributed to the detachment of UST, plunging the entire Terraform ecosystem into a death spiral. Luna plummeted from over $80 to nearly zero. $40 billion vanished. Ordinary people lost everything—retirement savings, education funds, entire life savings—disappearing in days.

What is Jane Street’s response? They call it “desperate actions with no other options” and “baseless accusations.”
The Problem Is, This Isn’t the First Time
In July 2025, India’s Securities and Exchange Board (SEBI) filed the largest market manipulation case in Indian history against Jane Street.
SEBI’s investigation found that Jane Street engaged in “pump-and-dump” manipulation of the Bank Nifty index in a pattern across 18 derivative expiry cycles from January 2023 to March 2025.

The operation was shockingly systematic:
Early morning trading: Jane Street’s algorithms heavily bought stocks and futures of the Bank Nifty index, pushing it up 1% to 1.3%. SEBI observed that on some trading days, Jane Street alone contributed entirely to the positive price impact on the index.
Simultaneously, they established large short put option positions, mainly selling call options and buying put options, with a heavily unbalanced scale compared to their stock positions. SEBI found that, in delta terms, their options positions were 7.3 times larger than their stock and futures positions. This was not risk hedging or arbitrage trading, but market manipulation in a deliberate direction with unnecessary steps.
In the afternoon: They reversed the previous day’s purchases, selling off the stocks bought in the morning, causing the index to fall and the short put options to profit. This cycle repeated each time options expired.
SEBI’s verdict: Jane Street illicitly profited approximately 4.843 billion rupees, about $580 million USD. They described Jane Street’s actions as “a deliberate attempt to manipulate settlement prices.” SEBI also noted that Jane Street continued this strategy despite clear warnings from India’s National Stock Exchange in February 2025.
SEBI’s language was unusually strong for a regulator: “Market fairness and the trust of millions of small investors and traders cannot be compromised by the conspiracy of an untrustworthy participant.”
Jane Street was banned from trading on Indian stock markets. They transferred over $560 million into a margin account and immediately filed an appeal. The case is still under review by India’s Securities Appellate Tribunal.

Now, let’s talk about Bitcoin.
Since November 2025, Bitcoin traders have observed a strange phenomenon: every morning around 10 a.m. Eastern Time—coinciding with the opening of the US stock market—a major sell-off occurs, affecting BTC and related ETF stocks.
This repeats eerily: Bitcoin rises during Asian and European trading sessions but is suppressed when the New York market opens.

The numbers are alarming. Charts from December 2025 show BTC plunging from $89,700 to $87,700 within minutes on certain trading days, liquidating $171 million in leveraged long positions before rebounding. This happened on December 1, 5, 8, 10, 12, and 15, and repeated in January and February 2026.

The criticism against Jane Street is justified. Jane Street is one of only four authorized members of BlackRock’s IBIT (the largest spot Bitcoin ETF in the world). The other three are Virtu Americas, JPMorgan Securities, and Marex. As an authorized participant, Jane Street has a unique ability to create and redeem ETF shares, giving them direct access to the inflow and outflow of Bitcoin into large institutional funds.

Their 13F reports confirmed large holdings. By Q3 2025, Jane Street held $5.7 billion worth of IBIT shares. They bought an additional $276 million in Q4, raising total holdings to over 20 million shares, worth about $790 million at year-end prices. At peak, they held nearly $2.5 billion worth of IBIT shares.

A suspicious point: while supposedly selling off BTC every morning, Jane Street increased its holdings of MSTR (Strategy, formerly MicroStrategy) by 473% in Q4 2025, buying 951,187 shares worth about $121 million. This happened while major funds like BlackRock and Vanguard significantly reduced their MSTR holdings by billions of dollars.

What does this imply? Selling BTC at market open to depress prices, liquidate long leveraged positions, then buying back at lower prices. Simultaneously, acquiring a large amount of highly leveraged Bitcoin-related assets, waiting for the inevitable price correction.

Glassnode co-founders Jan Happel and Yann Allemann revived this hypothesis on X (Twitter) via their Negentropic account, linking algorithmic trading models to the Terraform lawsuit. The Milk Road account amplified this, describing persistent rumors that trading desks of organizations are executing “very specific and conspiracy-laden procedures.”

Then the lawsuit happened. Then something unexpected occurred.
After Terraform’s lawsuit against Jane Street, the “10 a.m. crash”… did not happen. For the first time in months, Bitcoin opened higher in the US market instead of being suppressed.

Today, February 25, 2026, Bitcoin surged over 3%, breaking multiple resistance levels and trading above $68,000, just days after facing the risk of falling below $60,000. $323 million in short positions were liquidated. The Stochastic RSI hit 100. ETF funds recorded a net inflow of $257.7 million—the highest since early February.
The pattern was broken.
I want to be cautious here. Correlation does not imply causation. Multiple factors acted simultaneously: Trump’s Federal Message speech, technical signals indicating an oversold market, and short covering. The Fear & Greed Index was at 11, in extreme fear, often a turning point for contrarian trades. The RSI dropped to 15.80—the lowest since the COVID-19 crash in 2020, followed by a 1400% surge. But the timing of the event is undeniable.
On X, rumors spread that Jane Street was “forced to halt algorithmic trading” after the lawsuit was filed. Jane Street told Cointelegraph these were “baseless speculative claims.” Whether they were forced to stop or voluntarily paused for legal reasons, the outcome was the same:
Selling pressure vanished.

What does this really mean for Bitcoin?
Spot Bitcoin ETFs are expected to create a level playing field. They are accessible to institutions, tightly regulated, and backed by BlackRock. They have been very successful—just the IBIT ETF attracted over $20 billion in investments since launch.
However, the ETF structure introduces an element Bitcoin was designed to avoid: a trusted intermediary with privileged access to the system.
In January 2024, when the SEC approved spot Bitcoin ETFs, they required these funds to be created and redeemed entirely in cash. Whenever new shares are issued or redeemed, actual Bitcoin must be bought or sold. Participating firms—authorized participants—have a structural advantage over other market players.
By September 2025, the SEC approved the physical Bitcoin creation and redemption mechanism for IBIT, meaning authorized participants can now directly exchange Bitcoin for ETF shares without using fiat currency. This allows firms like Jane Street, Virtu, JPMorgan Chase, and Marex to directly control the flow of Bitcoin into and out of the largest institutional funds.

The “10-point lethal blow” is essentially a symptom of the same disease that has plagued the gold market for decades.
I wrote about this in the article “The Final Stage of Gold Begins”: Paper trading versus physical trading, where the entity with the most access to the trading system can complete price movements before other market participants react.
Two JPMorgan Chase traders, Gregg Smith and Michael Nowak, were convicted of market manipulation in precious metals futures over eight years, involving thousands of illegal trades. JPMorgan paid $920 million in settlement. Deutsche Bank paid $30 million for similar charges. UBS, HSBC, and six other individual traders faced charges from the CFTC for fraud violations.
The same scenario, but with different resources.
Each time, these companies called it “market making,” “arbitrage,” or “hedging.” Flowery words, but the result is always the same: ordinary people are exploited to the point of oblivion, while insiders reap enormous profits.

So, where do we go from here?
Overall, the big picture remains unchanged. Although $4.5 billion in net outflows from ETFs in the first eight weeks of 2026 seem concerning, Strategy (Saylor’s firm) just bought $39 million worth of BTC, accounting for 99% of all public company purchases during that period. The big players are not selling; they are waiting for the algorithms to do their job.

And perhaps, right now, the algorithms have been completed.
If Jane Street—whether due to legal risks, increased regulatory scrutiny across multiple continents, or simply self-preservation—are forced to withdraw from their supposed daily sell-off program, it would mean removing a persistent structural barrier that has kept Bitcoin suppressed for four months.
Bitcoin was created for this moment. A monetary system that does not rely on trusted intermediaries, does not require authorized participants, and cannot be pre-planned through secret messages sent to exchanges by former interns.
But let’s not forget why this situation arose. The companies that should have been “market makers” and “liquidity providers” are the very ones accused of orchestrating the collapse, manipulating national stock indices, and executing automatic daily sell programs on assets their ETF funds should be tracking.
This is the system Bitcoin was designed to replace.