Jane Street Group LLC was sued for alleged insider trading by the administrator winding up the affairs of Terraform Labs, the firm whose $40 billion collapse in 2022 roiled the crypto markets and contributed to the collapse of FTX.
Jane Street used “non-public information to front-run trading that hastened the collapse of Terraform,” Todd Snyder, a bankruptcy court-appointed administrator, claimed in a redacted complaint filed Monday in Manhattan federal court. Misusing the information allowed Jane Street “to unwind hundreds of millions of dollars in potential exposure at precisely the right time, mere hours before the Terraform ecosystem collapsed.”
A Jane Street spokesperson called the suit “desperate” and “a transparent attempt to extract money,” according to a statement.
Terraform imploded when its stablecoin TerraUSD lost its peg to the US dollar, leading to the collapse of its sister token, Luna. The failure set off a chain reaction across the crypto industry, ultimately contributing to the downfall of Sam Bankman-Fried’s FTX exchange.
Prosecutors claimed Terraform’s co-founder, Do Kwon, deceived investors about the stability of TerraUSD, which was said to be algorithmically “pegged” to the US dollar. Kwon pleaded guilty to fraud and was sentenced in December to 15 years in prison by a New York judge who called his crime “a fraud of epic generational scale.”
Kwon held 92% of Terraform. Snyder was tapped to administer a trust to maximize the recovery for Terraform’s investors and creditors and to close out its operations.
The Jane Street spokesperson said the company will defend itself “vigorously against these baseless, opportunistic claims.”
“Losses suffered by Terra and Luna holders were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs,” according to the statement.
Snyder said in a statement that “Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history.”
“On behalf of injured parties, we will pursue all avenues supported by the facts and the law against those who exploited their position and reaped substantial profits at the expense of Terraform Labs’ creditors,” Snyder said.
In addition to Jane Street, the suit names as defendants Jane Street co-founder Robert Granieri, trader Michael Huang and Bryce Pratt, an employee with the firm.
Snyder in December sued Jump Trading in federal court in Chicago, claiming the firm also illegally profited from Terraform’s collapse. Jump Trading denied the allegations at the time.
The case is Snyder v. Jane Street Group LLC, 26-cv-1504, US District Court, Southern District of New York (Manhattan).
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