The court-appointed administrator overseeing the bankruptcy of Terraform Labs has filed a lawsuit against Jane Street, accusing the trading firm of insider trading that worsened the collapse of the Terra ecosystem.
Todd Snyder, who leads the wind-down of Terraform, filed the complaint Monday in Manhattan federal court against Jane Street, its co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang. The lawsuit accuses the firm of misappropriating confidential information and manipulating market prices during the critical days of May 2022.
According to the heavily redacted complaint, Jane Street used connections with Terraform insiders to obtain material non-public information about the company. Snyder alleges that the firm used that information to sell tokens tied to the Terra blockchain and reduce its exposure just hours before the ecosystem unraveled.
Jane Street rejected the claims. In a statement, the firm described the lawsuit as a desperate attempt to extract money.
“This desperate 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,” the firm said.
It added that it will defend itself against what it called baseless, opportunistic claims.
Disputed trades around Curve liquidity withdrawal
At the center of the complaint stands a key liquidity move on May 7, 2022. Terraform withdrew 150 million TerraUSD from the Curve 3pool, a major decentralized finance liquidity pool, without a public announcement, according to the lawsuit.
Snyder claims that within 10 minutes of that withdrawal, Jane Street sold 85 million TerraUSD into the same pool. The complaint describes the transaction as the firm’s largest single swap and alleges that it triggered a fire sale that ultimately led to the collapse of the Terra ecosystem.
The lawsuit further claims that Jane Street used sensitive information throughout the depeg crisis to inform its trades. According to the complaint, Bryce Pratt, a former Terraform intern who later worked at Jane Street, reestablished communication lines with former colleagues at Terraform in early 2022. The administrator alleges that Pratt leveraged those relationships to pass material non-public information to Jane Street’s crypto desk.
“Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,” Snyder said in a statement to The Wall Street Journal.
The complaint also references a group message that allegedly included Terraform co-founder Do Kwon and Jane Street representatives during the turmoil. Snyder seeks damages, disgorgement of profits, interest, and a jury trial.
Terra collapse and broader fallout
Terraform’s collapse in May 2022 marked one of the largest failures in digital asset markets. TerraUSD, an algorithmic stablecoin designed to maintain a peg to the US dollar, lost that peg. Its sister token Luna entered a death spiral. Roughly $40 billion in market value vanished within days.
The shock rippled across the industry and contributed to a wave of bankruptcies among crypto lenders and trading firms later that year. Terraform filed for bankruptcy protection in the United States in 2024. A wind-down trust was established to pursue recoveries for creditors.
Do Kwon later pleaded guilty in the United States to two fraud charges. In December, he received a 15-year prison sentence in connection with the multibillion-dollar collapse.
The administrator’s lawsuit against Jane Street follows a separate action filed in December against Jump Trading. In that case, Snyder accused Jump and certain executives of entering secret agreements with Kwon and unlawfully profiting from the TerraUSD crisis. He sought $4 billion in damages in that matter.
Legal stakes for crypto market conduct
The complaint against Jane Street frames the alleged conduct as misappropriation of confidential information rather than traditional corporate insider trading. The theory centers on whether a trading firm that gains access to non-public protocol information through private channels can face liability if it trades on that information.
Jane Street maintains that Terraform’s management bears responsibility for the losses. The firm has stated that Terra and Luna holders suffered harm due to a multibillion-dollar fraud perpetrated by Terraform’s leadership.
The case now moves to federal court, where judges and jurors will assess whether the alleged communications and trades meet the legal standards for insider trading and market manipulation. For creditors seeking recovery after one of crypto’s most severe crashes, the outcome may determine whether additional funds return to the bankruptcy estate.
Gunel Ismayilova
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