High-frequency trading powerhouse Jane Street is accused of insider trading that accelerated the downfall of crypto project Terraform Labs in 2022, destroying billions in investor wealth.
Todd Snyder, the manager who is shutting down Do Kwon’s 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 has accused the trading company of using material non-public information from Terraform insiders to advance transactions that hastened Terraform’s demise. That means trading on private facts that swing prices before they are made public and then getting ahead of big orders to pocket profits first.
“Jane Street abused market relations to manipulate the market in her favor during one of the most important events in the history of cryptocurrencies,” Snyder said in a statement.
“On behalf of the aggrieved parties, we will pursue all avenues supported by the facts and the law against those who exploited their position and made 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 luna token, and the algorithmic stablecoin TerraUSD (UST).
The company filed for bankruptcy in January 2024, and a liquidation trust took control that same 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 USD in May 2022, and within days, the Luna token also fell to zero. The result: a staggering $40 billion market capitalization evaporated in just one week, causing massive wealth destruction around the world. It also caused the collapse of other crypto companies that were exposed to the project.
It all started on May 7, when Terraform quietly withdrew 150 million TerraUSD from stablecoin-focused decentralized trading platform Curve3pool. The lawsuit alleges that within 10 minutes, before Terraform informed the public of anything, a wallet linked to Jane Street also withdrew 85 million TerraUSD from the same fund. This allegedly caused panic in the market.
Kwon clarified the next day that the 150 million withdrawals were intended to move coins to a new liquidity pool for stablecoins, but it was too late.
Then, on May 9, as TerraUSD was beginning to fall, Jane Street’s Pratt started a group chat with Kwon and his team, offering offers to buy bitcoin or Luna. Kwon responded that Jump co-founder Bill DiSomma should have told them about Terraform’s fundraising push sooner.
Jan Street called the lawsuit an attempt to extract money from the trading company and vowed to vigorously defend itself against “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-million dollar fraud perpetrated by the management of Terraform Labs,” a Jane Street spokesperson said.
