High-frequency trading giant Jane Street was accused of insider trading, accelerating the collapse of cryptocurrency project Terraform Labs in 2022, destroying the wealth of billions of investors.
Todd Snyder, the administrator of Do Kwon’s Terraform Labs, has sued Jane Street for damages from co-founder Robert Granieri and employees Bryce Pratt and Michael Huang, the Wall Street Journal reports.
Snyder accuses the trading firm of hastening Terraform’s demise by front-running trades using material non-public information provided by Terraform insiders. This means trading before the private facts of price movements become public and then grabbing profits ahead of larger orders.
“In one of the most significant events in cryptocurrency history, Jane Street abused market relationships to manipulate the market in his favor,” Snyder said in a statement.
“On behalf of the injured parties, we will take all avenues with factual and legal basis to attack those who use their position to obtain huge profits at the expense of Terraform Labs’ creditors.
Terraform Labs is a Singapore-based blockchain company founded in 2018 by Do Kwon and Daniel Shin, known for creating the Terra blockchain, its native token luna, and algorithmic stablecoin TerraUSD (UST). The company filed for bankruptcy in January 2024 and was taken over by a liquidating trust later that year. Do Kwon was sentenced to 15 years in prison after pleading guilty to two criminal charges in August.
The stablecoin lost its 1:1 peg to the U.S. dollar in May 2022, and within days the luna token also fell to zero. The result: a staggering $40 billion in market value evaporated in just one week, resulting in a massive loss of global wealth. It also led to the collapse of other cryptocurrency companies involved in the project.
It all started on May 7, when Terraform quietly withdrew 150 million TerraUSD from the decentralized stablecoin trading platform Curve3pool. The lawsuit alleges that a wallet associated with Jane Street also withdrew 85 million TerraUSD from the same pool in the 10 minutes before Terraform notified the public of any information. This allegedly triggered market panic.
Kwon clarified the next day that the purpose of withdrawing $150 million was to transfer the tokens to a new stablecoin liquidity pool, but it was too late.
Then, on May 9, as TerraUSD began to slide, Jane Street’s Pratt initiated a group chat with Kwon and team with an offer to buy Bitcoin or Luna. Kwon countered that Jump co-founder Bill DiSomma should have informed them of Terraform’s fundraising earlier.
Jane Street called the lawsuit an attempt to extract money from the trading company while vowing to vigorously defend against “baseless accusations of opportunism.”
A spokesperson for Jane Street said: “Given that the losses suffered by Terra and Luna holders were caused by a multi-billion dollar fraud perpetrated by Terraform Labs management, this desperate lawsuit is a clear attempt to extort money.”
