The court-appointed administrator leading crypto company Terraform Labs through its bankruptcy has sued trading firm Jane Street, accusing it of insider trading that worsened the collapse of the multibillion-dollar Terra ecosystem.
On Monday, Todd Snyder, Terraform’s court-appointed administrator, sued Jane Street, its co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang in a Manhattan federal court, accusing them of “misappropriating confidential information and manipulating market prices.”
The heavily redacted complaint claimed Jane Street used connections with “Terraform insiders to learn material non-public information” about the company and used the information to sell off tokens tied to the Terra blockchain that worsened its collapse.
Jane Street told Cointelegraph it will defend itself over the “baseless, opportunistic claims.”
“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.
Terraform collapsed in May 2022 after its token, TerraUSD, an algorithmic stablecoin, lost its peg to the US dollar, leading to a death spiral that also saw the Terra token collapse and wipe out $40 billion.
Terraform filed for bankruptcy in the US in 2024 and its co-founder, Do Kwon, was later arrested and pleaded guilty in the US to two fraud charges. He was sentenced to 15 years in prison in December.
Jane Street sold at “precisely the right time” before collapse, suit claims
Snyder’s lawsuit claimed Jane Street got information that allowed it to sell off “hundreds of millions of dollars in potential exposure at precisely the right time, mere hours before the Terraform ecosystem collapsed.”
According to the suit, Jane Street onboarded Terraform for trading in 2018, but its trading of Terra tokens “did not take off” until 2022, after Pratt, a former Terraform intern, reestablished communication with his old teammates.
Pratt also set up communications with Terraform’s business development lead, which Jane Street used as “a back-channel source for material non-public information about Terraform,” Snyder claimed.
Related: Jump Trading hit with $4B lawsuit tied to $50B Terra crash
The lawsuit said that on May 7, 2022, Terraform withdrew 150 million TerraUSD tokens from a liquidity pool for trading stablecoins without publicly announcing the move.
Within 10 minutes of Terraform’s withdrawal, Snyder claimed Jane Street sold 85 million TerraUSD into the same liquidity pool, which was its largest-ever single swap that kicked off a fire sale of the token that “ultimately led to the collapse of the Terra ecosystem.”
The lawsuit alleged that Jane Street continued to use sensitive information to inform trades of the TerraUSD stablecoin as it was collapsing to garner more profits, with Pratt setting up a group chat with Kwon.
Snyder is seeking damages from Jane Street, along with disgorgement and interest, at a jury trial.
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