Jane Street asked a U.S. court to dismiss a lawsuit brought by the bankruptcy estate of Terraform Labs, rejecting claims that the trading firm helped trigger the 2022 collapse of the TerraUSD (UST) stablecoin and its sister token Luna.
In two filings submitted Thursday to the Southern District of New York, Jane Street and several employees said the case is an attempt to shift blame for the failure of the Terra ecosystem, which erased roughly $40 billion in value within days.
The firm urged the court to dismiss the complaint with prejudice, which would prevent Terraform from pursuing the same claims again.
“This case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market,” the defendants wrote.
Jane Street argued that the core issues behind Terra’s collapse have already been settled in court. It pointed to criminal and civil cases against Terraform founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and is serving a 15-year prison sentence. A jury also found Kwon and Terraform liable for securities fraud. According to the filing, Kwon said he was “alone responsible for everyone’s pain.”
Terraform’s lawsuit, filed in January by administrator Todd Snyder, accuses Jane Street of insider trading that sped up the collapse. Snyder alleges the firm used nonpublic information from Terraform insiders to trade ahead of major moves, including large withdrawals from the Curve liquidity pool that preceded UST losing its dollar peg.
For example, the complaint claims Terraform withdrew 150 million UST on May 7, 2022, and that a wallet linked to Jane Street pulled 85 million UST minutes later, sparking market panic. Jane Street disputes that narrative and denies any role in the collapse.
Jane Street maintains that “Terraform’s fraud scheme — in which Jane Street had no involvement — has already been prosecuted, adjudicated, and punished.”
Terraform Labs, founded in 2018, filed for bankruptcy in January 2024. Its downfall rippled across the crypto sector, contributing to failures at several firms exposed to the project. The court’s decision on Jane Street’s motion could shape how responsibility for that collapse is assigned.