Terraform Pursues Legal Action Against Wall Street Firm Over Terra Crash Profits

• Terraform Labs’ administrator has sued Jane Street, accusing it of insider trading that accelerated the collapse of LUNA and UST coins.
• He claims that Jane Street received non-public information from a former employee to front-run retail traders; Jane Street has dismissed the claims.

Terraform Labs, the crypto company behind the collapsed LUNA and UST tokens, has filed a new lawsuit against Jane Street, accusing the Wall Street giant of insider trading that sped up the collapse of its crypto ecosystem.

Filed in a Manhattan court, the lawsuit alleges that Jane Street used information that was not public to front-run the market and make millions at the expense of retail traders. The lawsuit comes two months since the project sued Jump Trading, another high-frequency trading giant, for contributing to and unlawfully profiting from its collapse.

The latest lawsuit claims that Terraform Labs’ relationship with Jane Street goes as far back as 2018, but that the trading firm started dealing in its LUNA and UST tokens in 2022. It allegedly used Bryce Patt, a former intern at the Labs to infiltrate the company, setting up messaging groups with Terraform officials to dig up information about the company.

One of the messaging groups was called ‘Bryce’s Secret’ and involved the head of business development and a senior software engineer at the Labs.

Patt later allegedly created an email chain introducing the leadership of Jane Street and Terraform, with the former expressing an interest in investing in the latter. However, as the lawsuit alleges, Jane Street used the communication to acquire non-public information which it used to guide its trading decisions on LUNA and UST.

Terraform: Jane Street Abused Market Relationships

The Terra ecosystem collapsed in May 2022 after its algorithmic stablecoin, UST, lost its peg and erased billions of dollars in a few days. Its sister token, LUNA, plunged shortly after. The two tokens wiped out over $40 billion in investor funds and sparked a broader fallout that brought down some of crypto’s largest firms at the time, including Three Arrows Capital and FTX.

Founder Do Kwon took the fall for the collapse and is currently serving 15 years behind bars for fraud, as we have reported.

Terraform Labs now wants other who might have triggered the collapse to face the law, starting with Jump Trading, which it took to court in December, and now Jane Street.

In a statement seen by the Wall Street Journal, administrator Todd Snyder stated:

Jane Street has refuted the claims, terming the lawsuit as Terraform’s ‘desperate’ attempt to extract money from the company. It added that the company’s collapse and the subsequent losses to investors “were the result of a multibillion-dollar fraud perpetrated by the management of Terraform Labs.”

“We will defend ourselves vigorously against these baseless, opportunistic claims,” a spokesperson for the company added.