LUNA crash before hitting zero? Terraform accuses market maker Jane Street of insider trading

Terraform Liquidator Sues Jane Street for Insider Trading, Accelerating Terra Collapse; UST Withdrawal Suspicion Becomes Litigation Focus, Both Sides Present Their Cases.

The “Terra-Luna Collapse,” which triggered a major crypto earthquake in 2022 and wiped out $40 billion, has new developments. The bankruptcy liquidator of Terraform Labs has officially filed a lawsuit, accusing Wall Street quant trading giant Jane Street of insider trading, which allegedly accelerated the fall of the Terra empire.

According to The Wall Street Journal, Terraform’s liquidator Todd Snyder submitted the complaint to court on Monday, naming Jane Street, co-founder Robert Granieri, along with employees Bryce Pratt and Michael Huang as defendants.

The complaint states that Jane Street deliberately assigned Bryce Pratt, a former Terraform Labs employee, to leverage personal connections with former colleagues, including the company’s software engineers and business development managers. Todd Snyder alleges that this “private chat group” composed of former colleagues became a secret channel to transmit major internal information from Terraform Labs to Jane Street, allowing the Wall Street giant to foresee market movements and conduct insider trading using non-public information before the market collapse.

The complaint mentions that on May 7, 2022, Terraform Labs quietly withdrew 150 million algorithmic stablecoins TerraUSD (UST) from Curve3pool without any public announcement. Ten minutes later, a wallet allegedly related to Jane Street also withdrew 85 million UST from the same liquidity pool.

Todd Snyder emphasizes that the timing and amount of Terraform Labs’ withdrawals were not disclosed to the public, providing clear evidence that Jane Street exploited insider information to “front-run” the market.

In fact, Snyder’s liquidation team had already launched a full-scale attack, filing a $4 billion claim against Jump Trading and its executives late last year, accusing the firm of artificially inflating UST’s value through “backdoor agreements.” The latest lawsuit further reveals that some non-public confidential information about Terraform Labs was leaked to Jane Street through Jump Trading.

In the complaint, Todd Snyder harshly criticizes: “Jane Street has abused market relationships during one of the most influential events in cryptocurrency history to manipulate the market, tilting the scales in their favor.”

He also vows that the liquidation team will exhaust all means to hold accountable those who harm Terraform Labs’ creditors and profit from their positions.

Jane Street strongly denies the allegations, countering that the Luna-UST collapse was purely due to Terraform Labs management’s involvement in a “multi-billion dollar fraud,” and states it will vigorously fight these “opportunistic accusations.”

In 2022, Terraform Labs faced a “death spiral” after UST depegged, with the ecosystem token LUNA plummeting over 99%. This catastrophe instantly wiped out over $40 billion in crypto market value, triggering a domino effect that led to the bankruptcy of several crypto lending platforms.

Terraform Labs officially filed for bankruptcy in 2024, agreeing to pay a hefty $4.47 billion fine to the U.S. Securities and Exchange Commission (SEC); founder Do Kwon, after admitting to two criminal charges, was sentenced to 15 years in prison by a U.S. court last December.

• This article is reprinted with permission from: BlockCast
• Original title: “Did Terraform Preemptively Leak Before the Terra Collapse? Terraform Labs Accuses Jane Street of ‘Insider Trading’”
• Original author: Block Sister MEL