Jane Street Accused Of Dumping UST Before Terra Collapse

Private Telegram Channel at the Centre of the Allegations

Jane Street Group is accused in a Manhattan federal lawsuit of using confidential information from inside Terraform Labs to unload $192 million of TerraUSD ($UST) just before the stablecoin collapsed in May 2022. The complaint alleges that a former Terraform intern working at Jane Street relayed nonpublic details via a private Telegram channel, enabling the firm to exit its position near par and then make about $134 million betting against the token as Terra's $40 billion ecosystem unravelled.

The suit also names Jane Street co-founder Robert Granieri and trader Michael Huang, cites federal securities and commodities laws, and is bolstered by a 2023 ruling that UST and Luna are securities as it seeks to claw back profits for Terraform's creditors.

The Critical Trade and Jane Street's Defence

Jane Street's largest alleged trade, an $85 million UST sale on decentralised exchange Curve Finance, came just nine minutes after Terraform quietly withdrew $150 million of UST liquidity from the same pool. That trade matters because public postmortems of Terra's collapse had long focused on a large Curve swap that helped push the token off its $1 peg. The lawsuit now alleges that the wallet belonged to Jane Street.

When a crypto analytics firm later told a Jane Street contact the firm had "made a killing," internal communications cited by the case show traders worrying about how their wallets had been identified, then discussing how to "decommission" them.

Jane Street has pushed back firmly. The trading firm asked a federal judge to dismiss the lawsuit, arguing it is an effort to shift blame for the 2022 collapse. Jane Street says Terraform's fraud has already been adjudicated through criminal and civil cases against founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and received a 15-year prison sentence. Jane Street also argued its largest trades came after damaging information about UST and LUNA was already public, making the insider trading claims "self-defeating."

"This 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," a Jane Street spokesperson said.

The lawsuit does not stand alone. Last December, bankruptcy administrator Todd Snyder also sued Jump Trading and its top executives, claiming Jump "actively exploited" the Terraform ecosystem through a backdoor deal to inflate the value of TerraUSD before it imploded, seeking $4 billion in damages under fraud, manipulation, and fraudulent transfer claims. The court's decision on Jane Street's motion to dismiss could shape how responsibility for the collapse is ultimately assigned.

Sources:
CoinDesk: Telegram group at centre of Jane Street insider-trading allegations in Terra collapse
CoinDesk: Jane Street asks court to reject Terraform claims tied to UST-LUNA crash
Disruption Banking: Jane Street hit with Terra $40B insider trading suit