The Terraform Labs bankruptcy administrator has sued Jane Street, alleging the quantitative trading firm used non-public information to profit at the height of the crypto market’s collapse in 2022.

The lawsuit centers on allegations that Jane Street obtained advance insight into Terraform’s internal liquidity decisions and positioned trades around those moves as TerraUSD began to lose its dollar peg, according to a report from The Wall Street Journal on Monday.

“Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,” Terraform Labs court-appointed plan administrator Todd Snyder alleged in a statement to WSJ.

The move follows a lawsuit filed in a U.S. federal court in late December against Jump Trading, which accused the trading firm of unlawfully profiting from and materially contributing to the collapse of the Terra ecosystem.

“This desperate suit is a transparent attempt to extract money when it is well-established that the losses suffered by Terra and Luna holders were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs,” Jane Street told Decrypt. “We will defend ourselves vigorously against these baseless, opportunistic claims.”

Decrypt has reached out to Terraform Labs wind-down trust for comment, but has not yet received a response.

“This lawsuit seems to argue that the most important moves do happen in private chats before hitting the blockchain,” Andrew Rossow, public affairs attorney and CEO of AR Media Consulting, told Decrypt.

The case “matters significantly, because the court isn’t just judging a trade anymore; it’s setting a precedent that ‘privileged access’ in DeFi is a legal liability, and not just a competitive advantage,” Rossow said.

If the allegations are proven, the case could signal a shift toward applying a stricter misappropriation theory in crypto markets.

Under that approach, liability would not depend on a traditional corporate insider relationship. Instead, a market maker could face exposure if it obtained confidential information from a protocol team and used it to trade against the broader market, Rossow explained.

The theory would also broaden the definition of an “insider” in such cases. Private chat groups or informal back channels could be treated as the functional equivalent of a corporate boardroom, meaning insider status could extend to anyone with direct access to a protocol’s crisis communications.

“It suggests that in crypto, an ‘insider’ isn’t just an executive; it’s anyone with a private line to the ‘war room’ of a protocol during a crisis,” Rossow said.

The legal observer said the case will likely hinge on materiality and source.

Terraform collapsed in May 2022 after its algorithmic stablecoin TerraUSD lost its dollar peg, sending its sister token Luna into a near-total wipeout within days. The roughly $40 billion implosion erased billions in investor value and intensified stress across the broader crypto market.

The fallout contributed to a wider industry downturn that led to a string of failures, including the eventual collapse of FTX later that year.

Terraform filed for bankruptcy in January 2024, and a wind-down trust was later established to pursue recoveries for creditors. Founder Do Kwon has since pleaded guilty to criminal charges and is serving a 15-year prison sentence.

Editor’s note: This story has been updated with a response from Jane Street.