Jane Street Fights Insider Trading Allegations Linked to $40B Terra Collapse

Jane Street, a high-frequency trading firm valued at $45 billion, has filed a motion to dismiss a lawsuit alleging it gained an insider advantage during the near-collapse of Terra’s UST stablecoin in May 2022.

In February 2024, Todd Snyder, the court-appointed administrator overseeing the liquidation of Terraform Labs, filed the lawsuit against Jane Street, its co-founder Robert Granieri, and employees Michael Huang and Bryce Pratt. Snyder claims the firm profited from trades that "would have been impossible without inside information to which it had unique access."

Jane Street strongly denies the allegations, arguing in a motion filed on May 23, 2024, that it could not have traded on non-public information because its transactions occurred after such details became publicly available.

The Complaint is self-defeating. Plaintiff’s own pleading acknowledges that Jane Street’s single largest UST sale — 85 million UST — occurred ten minutes after the supposed material non-public information was visible to the market.

The Terra collapse in May 2022 resulted in approximately $40 billion in investor losses and triggered a domino effect that contributed to the downfall of crypto exchange FTX and other firms exposed to UST and Terra’s native cryptocurrency, LUNA. Terraform Labs’ founder, Do Kwon, was later sentenced to 15 years in prison for fraud.

Timing and Allegations

Snyder’s lawsuit centers on Bryce Pratt, a former Terraform Labs intern who worked at the company until September 2021. Snyder alleges Pratt used a backchannel to obtain non-public information from his former employer, enabling Jane Street to sell off a significant amount of UST on May 7, 2022, to maximize profits and avoid losses.

Jane Street counters that its 85 million UST sale on May 7 was a direct response to the stablecoin’s deteriorating peg and was not influenced by insider information. Between May 8 and 13, 2022, the firm also opened short positions on UST and LUNA, which Snyder alleges were based on insider knowledge. Jane Street maintains these positions were established before any alleged "rescue package" — a proposed emergency fundraising effort to stabilize UST — was discussed.

Broader Legal Battles

Jane Street is not the only trading firm facing allegations related to the Terra collapse. In December 2023, Snyder filed a similar lawsuit against Jump Trading, a Chicago-based firm, accusing it of market manipulation, fraud, and self-dealing. Jump Trading has denied the claims, calling them a "transparent attempt" to evade a $4.4 billion fine imposed by the U.S. Securities and Exchange Commission in 2024.

The motion to dismiss filed by Jane Street is currently under review in the Southern District of New York, where judges typically have 60 days from submission to issue a decision.