Terraform’s $40 billion collapse resurfaces as Jane Street confronts an insider‑trading lawsuit
A U.S. federal court case has been filed by the bankruptcy administrator of Terraform Labs accusing Jane Street of insider trading linked to Terra’s 2022 collapse. The complaint alleges the trading firm used confidential information to trade ahead of key market events, worsening the downfall of Terra’s algorithmic stablecoin. Jane Street denies the claims, calling the suit baseless and blaming Terraform’s own management for losses. The case could reshape scrutiny of institutional activity in digital‑asset markets. The suit contends Jane Street received material non‑public data through a former Terraform intern who set up private communication channels. On May 7, 2022, Terraform quietly removed 150 million UST from Curve’s 3‑pool, a move not yet public. Minutes later, a wallet tied to Jane Street withdrew 85 million UST, allowing the firm to unwind exposures before panic spread. Prosecutors argue this timing amplified liquidity stress and accelerated the loss of confidence in the stablecoin. Terra’s failure wiped about $40 billion in value and highlighted systemic weaknesses across crypto firms. Regulators are increasingly targeting information asymmetry, market manipulation, and the role of large liquidity providers. If proven, the lawsuit may set a precedent for how proprietary traders handle non‑public information in decentralized markets. Even if dismissed, it revives debate over accountability during major crypto meltdowns.
