High-frequency trading firm Jane Street is embroiled in a lawsuit alleging insider trading that contributed to the collapse of Terraform Labs in 2022, resulting in significant losses for investors. The suit was filed by Todd Snyder, the administrator overseeing the winding down of Terraform Labs, and targets co-founder Robert Granieri along with employees Bryce Pratt and Michael Huang.
Snyder claims that Jane Street utilized confidential information from Terraform insiders to engage in front-running trades, which allegedly accelerated the downfall of the crypto project. This practice involves trading on nonpublic information that could influence market prices before such information is disclosed to the public.
“Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,” Snyder stated.
The lawsuit seeks damages on behalf of those affected by the collapse. Snyder emphasized that they will pursue all legal avenues against those who allegedly exploited their position for profit at the expense of Terraform Labs’ creditors.
Founded in 2018 by Do Kwon and Daniel Shin, Terraform Labs was a Singapore-based blockchain company recognized for developing the Terra blockchain, its native token Luna, and the algorithmic stablecoin TerraUSD (UST). The company declared bankruptcy in January 2024, with a trust taking control of its assets later that year. Do Kwon was sentenced to 15 years in prison after pleading guilty to two criminal charges in August.
The crisis began on May 7, 2022, when Terraform withdrew 150 million TerraUSD from the decentralized trading platform Curve3pool. The lawsuit alleges that within ten minutes of this withdrawal, a wallet associated with Jane Street withdrew 85 million TerraUSD from the same pool, triggering a market panic.
Do Kwon later clarified that the withdrawals were intended to transfer coins to a new liquidity pool, but by then, the damage had been done. On May 9, as TerraUSD began to decline, Jane Street’s Pratt reached out to Kwon and his team with offers to buy Bitcoin or Luna, to which Kwon responded that Jump’s co-founder should have informed them earlier about Terraform’s fundraising efforts.
In response to the lawsuit, Jane Street has labeled the allegations as unfounded and an attempt to extract money from the firm. A representative stated, “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 multibillion-dollar fraud perpetrated by the management of Terraform Labs.”
Jane Street is facing a lawsuit alleging insider trading that contributed to the downfall of Terraform Labs, which resulted in massive investor losses. The firm has denied the claims, calling them baseless and a desperate attempt to extract funds.
Source: Wall Street Journal