- The bankruptcy administrator for Terraform Labs is suing trading firm Jane Street and three employees, alleging they used insider information to profit from Terra’s collapse.
- The lawsuit claims Jane Street made its largest-ever token swap to sell TerraUSD just minutes after Terraform withdrew millions, allegedly sparking the death spiral.
- Jane Street has called the lawsuit “baseless” and “opportunistic,” arguing the collapse resulted from fraud by Terraform’s management.
- Terraform’s implosion in May 2022 wiped out an estimated $40 billion in value, and its co-founder, Do Kwon, is now serving a 15-year prison sentence.
The court-appointed administrator of the bankrupt Terraform Labs has sued trading firm Jane Street Group LLC in a Manhattan federal court, accusing it of insider trading that worsened the ecosystem’s multibillion-dollar crash. Todd Snyder filed the lawsuit on Monday, alleging Jane Street, its co-founder, and two employees used confidential information to manipulate markets.
According to the heavily redacted complaint, the firm leveraged connections with Terraform insiders to gain non-public information. This allegedly allowed Jane Street to sell “hundreds of millions of dollars in potential exposure at precisely the right time” before the collapse.
The suit details that on May 7, 2022, Terraform withdrew 150 million TerraUSD tokens from a liquidity pool. Within ten minutes, Jane Street allegedly sold 85 million TerraUSD into the same pool, initiating a fire sale. This massive swap reportedly triggered the death spiral that erased $40 billion from the Terra ecosystem.
However, Jane Street has vigorously denied the allegations. The firm told Cointelegraph it will defend against the “baseless, opportunistic claims,” stating the losses stemmed from fraud by Terraform’s management. This lawsuit follows other major legal actions tied to the crash, including a $4 billion case against Jump Trading.
Consequently, Snyder is seeking damages and disgorgement of profits through a jury trial. This legal action unfolds as Terraform’s co-founder, Do Kwon, serves a 15-year prison sentence after pleading guilty to fraud charges in the United States.
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