High-frequency trading powerhouse Jane Street is accused of insider trading that accelerated the 2022 collapse of crypto project Terraform Labs, which destroyed billions in investor wealth.
Todd Snyder, the administrator behind Do Kwon’s shuttered Terraform Labs, has sued Jane Street, seeking damages from co-founder Robert Granieri and employees Bryce Pratt and Michael Huang, according to a Wall Street Journal report.
Snyder accused the trading company of using material nonpublic information from Terraform insiders for preliminary transactions, which hastened Terraform’s demise. This means trading on private data about price fluctuations before they are made public, then anticipating big orders to pocket the profits first.
“Jane Street abused market relationships to rig the market in its favor during one of the most significant events in crypto history,” Snyder said in a statement.
“On behalf of the injured parties, we will pursue all avenues supported by the facts and the law against those who have exploited their position and reaped substantial profits at the expense of Terraform Labs’ creditors.
Terraform Labs was a Singapore-based blockchain company founded in 2018 by Do Kwon and Daniel Shin, best known for creating the Terra blockchain, its native token Luna, and the algorithmic stablecoin TerraUSD (UST). The company filed for bankruptcy in January 2024, and a liquidation trust took control 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 USD peg in May 2022 and within a few days, the Luna token also crashed to zero. The result: an astonishing $40 billion in market capitalization evaporated in just one week, leading to massive destruction of wealth around the world. This also led to the collapse of other crypto companies exposed to the project.
It all started on May 7 with Terraform quietly withdrawing 150 million TerraUSD from stablecoin-focused decentralized trading platform Curve3pool. The lawsuit alleges that within 10 minutes, before Terraform informed the public anything, a wallet linked to Jane Street also withdrew 85 million TerraUSD from the same pool. This would have triggered market panic.
Kwon clarified the next day that the 150 million withdrawals were intended to move the coins to a new liquidity pool for stablecoins, but it was too late.
Then, on May 9, as TerraUSD began to decline, Jane Street’s Pratt started a group chat with Kwon and his team, offering floating offers to buy Bitcoin or Luna. Kwon countered that Jump co-founder Bill DiSomma should have informed them about Terraform’s fundraising campaign sooner.
Jan Street called the lawsuit an attempt to extort money from the trading company while pledging to vigorously defend itself against the “opportunistic and baseless claims.”
“This desperate lawsuit is a transparent attempt to extract money when it is well established that the losses suffered by the holders of Terra and Luna were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs,” a Jane Street spokesperson said.
