TLDR
- Jane Street has requested dismissal of Terraform Labs’ insider trading claims in Manhattan federal court
- The trading firm contends the lawsuit attempts to deflect responsibility for Terraform’s own fraudulent actions
- Do Kwon, Terraform’s founder, has already admitted guilt to conspiracy and wire fraud charges and received a 15-year prison term
- Jane Street maintains its most significant transactions occurred after critical details were publicly available
- The firm seeks dismissal with prejudice to prevent any future refiling of identical claims
In a significant legal pushback, trading powerhouse Jane Street has petitioned a Manhattan federal court to dismiss allegations brought by Terraform Labs’ bankruptcy estate. The complaint accuses the firm of engaging in insider trading that exacerbated the catastrophic 2022 Terra ecosystem meltdown.
🚨LATEST: Jane Street has filed to DISMISS Terraform Labs’ insider trading lawsuit over the UST/LUNA collapse.
Case so far:
1. Terraform sued Jane Street, blaming it for the collapse via insider trading and market manipulation
2. Jane Street says its largest trades occurred… pic.twitter.com/Mj60RkgGvf
— Coin Bureau (@coinbureau) April 24, 2026
The legal action was initiated in February by Todd Snyder, the court-appointed administrator overseeing Terraform’s bankruptcy proceedings. The complaint targets Jane Street along with co-founder Robert Granieri and traders Bryce Pratt and Michael Huang. The allegations center on claims they executed trades in Terra-related tokens based on confidential information obtained from Terraform insiders.
In its dismissal motion, Jane Street mounted an aggressive defense. The firm characterized the legal action as a calculated effort “to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.”
The Terra platform spectacularly imploded in May 2022. Its algorithmic stablecoin TerraUSD dramatically lost its dollar peg within hours. The resulting cascade triggered a devastating crash in the LUNA token, eliminating approximately $40 billion in market capitalization.
The Fraud Was Already Prosecuted
Central to Jane Street’s defense is the position that judicial proceedings have already addressed the underlying fraudulent conduct. In December, Terraform’s founder Do Kwon entered a guilty plea to charges of conspiracy and wire fraud. He currently faces 15 years behind bars.
Additionally, a jury determined Terraform and Kwon bore civil liability for securities fraud. Court documents reveal Kwon acknowledged he was “alone responsible for everyone’s pain.”
Jane Street emphasizes it played no role whatsoever in Terraform’s fraudulent operations and asserts that reopening questions about what caused the collapse through this litigation is legally inappropriate.
The firm invoked the “Wagoner rule,” a well-established legal doctrine preventing a bankruptcy estate from pursuing third-party defendants to recoup damages stemming from the estate’s own fraudulent conduct.
Insider Trading Claims Called “Self-Defeating”
Jane Street also directly contested the insider trading accusations. The firm highlighted that its most substantial TerraUSD transaction took place merely 10 minutes after the allegedly confidential information became publicly accessible to market participants.
According to the motion, Terraform accused Jane Street of obtaining an unfair advantage through “back-channel communications” regarding when a liquidity pool transition would occur. However, Jane Street asserts that Terraform could not pinpoint even one specific communication, despite conducting thorough pre-litigation discovery.
Jane Street further emphasized that the liquidity pool transition had been disclosed to the public weeks prior to any relevant trading activity, and market data showed no reaction to that initial announcement.
The firm established a short position starting May 8, 2022, and executed asset sales on May 7. Jane Street contends Terraform has failed to identify any information that qualified as both materially significant and confidential during these trading windows.
Jane Street additionally raised concerns about jurisdiction, asserting Terraform provided insufficient evidence proving the disputed trades were executed within United States territory.
The firm requests the court grant dismissal with prejudice, a ruling that would permanently bar Terraform’s bankruptcy estate from pursuing these identical allegations in the future.
