Quant trading giant Jane Street has filed a motion to dismiss a multi-billion-dollar lawsuit accusing the firm of insider trading during the $40 billion collapse of Terraform Labs, arguing the claims are “self-defeating” and based on flawed assumptions. The lawsuit, brought by the bankruptcy administrator of Terraform Labs, alleges that Jane Street used non-public information to exit positions and profit during the collapse of UST and LUNA in May 2022.
Jane Street Says Trades Were Based on Public Information
In its filing, Jane Street strongly denies any insider advantage, stating that its trades occurred after key market-moving information was already public.
The firm pointed to a critical transaction—an $85 million UST sale—which it says happened after market signals were visible to all participants, undermining the claim that it acted on privileged information.
Jane Street argues this timing alone invalidates the core allegation of insider trading.
Lawsuit Centers on Terra’s $40 Billion Collapse
The case stems from the dramatic failure of the Terra ecosystem, where the algorithmic stablecoin UST lost its peg, wiping out tens of billions in value and triggering a broader crypto market meltdown. The administrator overseeing Terraform’s bankruptcy claims that Jane Street exploited inside knowledge, including liquidity movements, to avoid losses and profit from the collapse. A key allegation focuses on the firm’s ability to act within minutes of large liquidity shifts tied to Terraform’s internal decisions.
Jane Street Blames Terraform for Its Own Collapse
In its defense, Jane Street is taking a more aggressive stance by arguing that Terraform itself was responsible for the fraud, and therefore cannot seek damages from third parties. The firm invoked legal arguments suggesting that a company engaged in wrongdoing cannot sue others for benefiting from that same misconduct, framing the lawsuit as an attempt to shift blame.
Jane Street also pointed to prior legal outcomes, including:
- Do Kwon’s fraud conviction and prison sentence
- Multi-billion-dollar regulatory settlements tied to Terraform
to reinforce its position that the collapse has already been legally resolved.
Timing and “Public vs Private Information” at the Core
The case ultimately hinges on a critical question. What qualifies as non-public information in crypto markets? Jane Street argues that blockchain data and market signals are inherently public, meaning its trades were based on observable conditions, not insider access. However, the plaintiff claims that timing and access to specific internal actions created an unfair advantage. This distinction could become a defining legal test for insider trading in decentralized markets.
