The wind-down trust of Terraform Labs has sued Jane Street, alleging the trading firm used non-public information to profit during the May 2022 collapse of TerraUSD.
According to a report by The Wall Street Journal, the complaint claims Jane Street gained advance insight into Terraform’s internal liquidity decisions and positioned trades as TerraUSD began to lose its dollar peg.
“Jane Street abused market relationships to rig the market in its favor during one of the most consequential events in crypto history,”
Terraform court-appointed plan administrator, Todd Snyder said in a statement.
The lawsuit follows earlier legal action against Jump Trading and centres on whether confidential crisis communications and liquidity withdrawals during the depeg created an uneven informational playing field.
Andrew Rossow, chief executive of AR Media Consulting, said the case could test whether “privileged access” in decentralised finance constitutes legal liability, potentially expanding insider definitions beyond traditional corporate roles.
Terraform’s algorithmic stablecoin TerraUSD collapsed in May 2022, wiping out roughly $40 billion in value and accelerating broader market stress that later culminated in the failure of FTX.
Terraform filed for bankruptcy in January 2024, and founder Do Kwon has since pleaded guilty to criminal charges, as the estate now seeks recoveries for creditors through litigation tied to the market’s 2022 unraveling.