Jane Street, one of the world’s leading trading companies, requested the rejection of the lawsuit filed by the bankrupt Terraform Labs in its application to the US Court of Southern District of New York. Jane Street’s lawyers argued that the company had no responsibility for the sudden loss of value of TerraUSD (UST) and Luna tokens in 2022. As a result of this incident, a total of approximately $40 billion worth of assets were deleted from the market.
Litigation Process and Jane Street’s Defense
In two different petitions submitted to the court, Jane Street claimed that Terraform Labs was trying to blame its losses on itself. The company claimed that the lawsuit was baseless and that the real problems in the Terra ecosystem had already been identified by previous court decisions. The defense side argues that Terraform Labs is unfairly trying to get money from Jane Street with this lawsuit.
The petition pointed out the criminal and civil lawsuits filed against Do Kwon, the founder of Terraform Labs, and stated that Kwon was found guilty of fraud and conspiracy and sentenced to a total of 15 years in prison. It was also reminded that Kwon and the company were accused of securities fraud in the jury verdict. In light of these documents, Jane Street pointed out that the mismanagement in the Terra ecosystem developed outside itself.
“This case has turned into an attempt to put Jane Street to blame for the massive market fraud perpetrated by Terraform Labs,” the statement said.
Allegations of Insider Use and IHR Collapse
In the lawsuit filed in January on behalf of its executive Todd Snyder, Terraform Labs accused Jane Street of trading on inside information and thus accelerating the collapse of the Terra ecosystem. According to the company’s claim, Jane Street made large volumes of transactions using important information leaked to her from within the company. In this context, it was claimed that the company created panic by withdrawing 85 million UST from the market in a short time through a wallet on May 7, 2022. However, Jane Street firmly denies the accusations.
The company reiterates that the real responsible is Terraform Labs management and that it was not involved in this process in any way. The defense also argued that the relevant illegal acts and fraud had been prosecuted and their verdicts were final.
Bankruptcy of the Terra Ecosystem and Its Reflections on the Sector
Founded in 2018, Terraform Labs filed for bankruptcy in January 2024. The failure of the Terra project directly affected not only the firm, but also many companies invested in or exposed to its ecosystem. The decline in value in UST and Luna led to chain losses across a wide swath of the crypto market. Jane Street’s application could set a precedent for determining which players will be held responsible for major projects that go bankrupt.
It is stated that the decision of the court as a result of the judicial process will provide guidance on which parties will be held responsible and at what level in similar cases. Thus, it seems possible to adopt a new approach in the lawsuits filed after major collapses in the cryptocurrency industry.
The results of this contentious case between Terraform Labs and Jane Street can be used as a reference for role distribution in future crises experienced by similar projects.
