Did this high-frequency trading giant trigger the $40 billion Luna crash and the 2022 crypto winter?

Written by: 0xjs@Golden Finance

Do you remember the Luna/UST crash event in May 2022, when the market cap exceeded $40 billion and collapsed within five days? (See Golden Finance’s previous report “Recap of the LUNA Brothers’ Crash Moment”)

The Luna crash, along with the subsequent collapse of Three Arrows Capital in the second half of 2022, and the bankruptcy of SBFFTX, directly triggered the crypto winter of 2022-2023.

While Luna’s collapse was partly due to its mechanism design, the latest documents reveal that Wall Street high-frequency trading giant Jane Street was the hidden hand behind this financial game. They obtained insider information from Terraform Labs, triggered Luna’s crisis, profited immensely, and exited unscathed.

Terraform Labs Liquidation Trustee Sues Jane Street

On February 24, 2026, Terraform Labs’ liquidation trustee filed a lawsuit against Jane Street, accusing it of insider trading.

The court appointed Todd Snyder, co-head of the restructuring group for Piper Sander, the Terraform Labs liquidation trustee, to file a redacted complaint in Manhattan federal court on Monday. The complaint states that Jane Street used “non-public information to front-run trades, accelerating Terraform’s collapse.” Snyder claims that the illegal use of this information allowed Jane Street to “precisely close out hundreds of millions of dollars in potential risk exposure just hours before the Terraform ecosystem collapsed.”

Terraform’s collapse was caused by its stablecoin TerraUSD (UST) losing its peg to the dollar, which led to its sister token Luna plummeting as well. This event triggered a chain reaction in the crypto industry, ultimately causing Bitcoin’s price to fall below $20,000. Terraform co-founder Do Kwon was recently sentenced to 15 years in prison for deceiving investors and falsely claiming that TerraUSD’s stability was maintained through an algorithmic peg to the dollar. Kwon admitted to fraud and was sentenced last December by a New York judge. The judge described his crimes as “an unprecedented, generation-defining fraud.”

Terraform filed for bankruptcy in January 2024, and later that year established a liquidation trust. Snyder was tasked with managing a trust fund aimed at maximizing recovery for Terraform investors and creditors and ending its operations. During his work, Snyder deeply realized: “In one of the most impactful events in crypto history, Jane Street abused market relationships and manipulated the market for its own benefit.”

Snyder stated: “We will hold accountable those who exploited their positions to harm Terraform Labs’ creditors and profited from it, based on facts and law.” He is now seeking compensation from Jane Street, its co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang.

Below are some details revealed in the lawsuit:

By the end of 2018, Jane Street had signed direct trading agreements with Terraform.

However, it wasn’t until February 2022 that Jane Street sent former Terraform intern Bryce Pratt to reconnect with his former colleagues at Terraform, initiating trading of Terraform tokens.

One of Pratt’s communication channels with Terraform was a group chat he created with a former colleague, including a software engineer and Terraform’s business development head. The group chat was called “Bryce’s Secret,” and it served as a channel to relay Terraform-related information to Jane Street.

The lawsuit states that Pratt initiated a series of emails introducing Terraform’s business development head to Jane Street’s “DeFi” lead. Subsequently, the two sides began regular communication to discuss potential investments in Terraform. But Jane Street turned these communications into a secret channel to obtain significant non-public information about Terraform and used this confidential data for trading to maximize profits.

Specifically, on May 7, 2022, at 5:44 PM Eastern Time, Terraform withdrew 150 million TerraUSD from Curve’s 3-pool (a liquidity pool for swapping stablecoins).

According to the complaint, less than ten minutes after Terraform’s withdrawal (which had not been publicly announced), some analysts believed that a crypto wallet associated with Jane Street withdrew 85 million TerraUSD from the same liquidity pool. This $85 million UST transaction was the largest single swap in Curve 3-pool history, directly triggering a sharp sell-off of UST—ultimately causing the Terra ecosystem to collapse. Over the next two days—May 8 and 9, 2022—UST trading volume nearly doubled, and its price plummeted. By May 9, 2022, UST had de-pegged to below $0.80.

As UST’s price declined, Terraform attempted to stabilize the market and re-peg UST to $1. Similar to the brief de-peg in May 2021, Terraform secretly enlisted Jump Trading’s help—without market awareness.

On May 8, Do Kwon publicly stated that the $150 million withdrawal was to transfer TerraUSD to a new stablecoin liquidity pool. However, the specific timing of activities related to the new liquidity pool, including any withdrawals from Curve 3-pool, was not disclosed.

These transactions increased selling pressure at a critical moment, accelerating Terraform’s collapse while allowing Jane Street to profit (or avoid huge losses).

However, the story didn’t end there. The lawsuit states that after the May 7 transaction, Jane Street continued to trade TerraUSD using confidential information (including data learned from Jump Trading) to generate more profits.

On May 9, although TerraUSD had de-pegged from Bitcoin but had not fully collapsed, Pratt communicated in Jane Street’s group chat with Kwon, Huang, and others, expressing interest in acquiring $200 million to $500 million worth of Bitcoin or Luna tokens at a significant discount. Kwon responded that Bill DiSomma, co-founder of Jump, should proactively contact Jane Street to discuss Terraform’s financing.

Another high-frequency trading giant: Jump Trading

Snyder’s lawsuit against Jane Street is part of a broader effort by Terraform’s liquidation trustee to hold involved or profit-making parties accountable.

In December 2025, Snyder filed a separate $4 billion lawsuit against Jump Trading, accusing it of market manipulation, self-trading, and similar misconduct that accelerated Terra’s collapse.

Jump had acquired over 61 million Luna tokens at $0.40 each when Luna’s market price was around $90. Jump later sold these tokens for approximately $1.28 billion in profit.

After Jane Street withdrew $85 million in liquidity on May 7, 2022, triggering UST’s de-peg, Terraform immediately sought Jump Trading’s help, just as in May 2021. The Luna Foundation Guard transferred nearly 50,000 Bitcoin (about $1.5 billion) to Jump without a written agreement, aiming to bring UST back to $1.

But the final destination of these Bitcoins remains unknown. The Terraform liquidation trustee’s lawsuit against Jump Trading states: “It is unclear whether Jump further profited from this.”

Conclusion

High-frequency trading market makers have always been controversial.

For example, Jane Street, the defendant in this case, reportedly sold Bitcoin at market open multiple times over the past two months: allegedly, Jane Street sold Bitcoin every morning at 10 AM (Eastern Time) in late 2025 and early 2026, synchronized with U.S. stock market openings.

In December 2025, charts showed that Bitcoin’s price dropped from $89,700 to $87,700 within minutes after the U.S. stock market opened, then recovered during the rest of the day and Asian trading hours. The next day, Jane Street sold again at market open, repeating the cycle.

As a primary authorized participant in Bitcoin ETFs (such as BlackRock’s IBIT), Jane Street can participate in ETF creation and redemption. Selling at market open depresses the price, triggers liquidations, and creates buying opportunities—Jane Street leverages this cyclical volatility with its unique advantages.

Critics argue that Bitcoin’s sharp decline at market open is market manipulation.

Some believe market makers are inherently guilty:

The entire business model of high-frequency trading market makers involves repeatedly initiating momentum trades (using high leverage on tiny positions) to create false price directions, luring retail investors in. They then quickly reverse positions, harvesting profits and exiting.

Others see market makers as simply more skilled at mathematics:

Market makers do not destroy markets; they identify structural weaknesses and seize opportunities. If Terra can be de-pegged through strategic trading, it’s a design flaw, not a crime. The real issue lies in the so-called insider information channels. Unstable algorithmic stablecoins are like pressure tests that could explode at any moment—Jane Street is just more mathematically proficient than most.