Jane Street Accused of Insider Trading in $40B Terraform Labs Collapse
Key Takeaways
- ▸Jane Street is accused of using insider information to withdraw 85 million TerraUSD from Curve3pool minutes after Terraform's undisclosed 150 million UST withdrawal, allegedly triggering the stablecoin's depeg
- ▸The Terraform collapse in May 2022 resulted in $40 billion in market cap evaporation within one week, causing massive investor losses and cascading failures across the crypto industry
- ▸Jane Street denies the allegations as "baseless" and argues losses were caused by fraud perpetrated by Terraform Labs management, including Do Kwon who received a 15-year prison sentence
Summary
High-frequency trading firm Jane Street is facing serious allegations of insider trading that allegedly accelerated the catastrophic 2022 collapse of Terraform Labs' TerraUSD stablecoin and Luna token. According to a lawsuit filed by Terraform Labs' bankruptcy administrator Todd Snyder, Jane Street used material nonpublic information to front-run trades that triggered a market panic, resulting in a $40 billion wipeout in market capitalization within one week.
The lawsuit claims that on May 7, 2022, within 10 minutes of Terraform quietly withdrawing 150 million TerraUSD from the Curve3pool decentralized exchange, a wallet linked to Jane Street withdrew 85 million TerraUSD from the same pool—before any public announcement was made. This withdrawal allegedly helped trigger the stablecoin's loss of its dollar peg and subsequent market collapse. The suit names Jane Street co-founder Robert Granieri and employees Bryce Pratt and Michael Huang as defendants, accusing them of exploiting insider relationships to profit at the expense of Terraform creditors.
Jane Street has vehemently denied the allegations, calling the lawsuit a "desperate" and "baseless" attempt to extract money from the firm. A spokesman stated that the losses suffered by Terra and Luna holders were the result of a "multibillion-dollar fraud perpetrated by the management of Terraform Labs," referring to the criminal conviction of founder Do Kwon, who was sentenced to 15 years in prison after pleading guilty to two criminal counts in August. The case represents one of the most significant legal battles stemming from the Terraform collapse, which led to cascading failures across multiple crypto companies and massive wealth destruction for investors worldwide.
- The lawsuit seeks damages from Jane Street co-founder Robert Granieri and employees Bryce Pratt and Michael Huang for allegedly front-running trades using material nonpublic information
