Crypto’s most infamous collapse is back in the spotlight, and this time the blast radius reaches deep into Wall Street. A new lawsuit doesn’t just revisit the $40 billion Terra-Luna meltdown; it questions whether one of the world’s most sophisticated trading firms saw the collapse coming and moved first. If the allegations hold up in court, the narrative around Terra’s death spiral may shift from inevitable failure to something far more uncomfortable: informed players exiting while everyone else was still being told to hold.
Jane Street Accused of Rigging the Market in Crypto’s Most Destructive Collapse
The trading firm Wall Street calls untouchable is now fighting a lawsuit that could rewrite the history of the $40 billion Terra-Luna implosion.
Jane Street Group LLC was sued on February 23 by Todd R. Snyder, the bankruptcy court-appointed administrator winding down Terraform Labs, the firm whose collapse in 2022 roiled crypto markets and contributed to the downfall of FTX.
The complaint, filed in a Manhattan federal court, accuses one of the world’s most profitable trading firms of using stolen information to walk away clean while retail investors lost everything. Claims invoke the Commodity Exchange Act, Securities Exchange Act, fraud, and unjust enrichment. Snyder seeks damages, disgorgement, interest, and a jury trial in the U.S. District Court for the Southern District of New York (Case No. 1:26-cv-1504).
The 10-Minute Window That Changed Everything
According to a Wall Street Journal exclusive, the complaint details a damning sequence. On May 7, 2022, Terraform Labs withdrew 150 million TerraUSD from the Curve3pool without any public announcement. Within 10 minutes, a wallet allegedly linked to Jane Street withdrew an additional 85 million TerraUSD from the same pool. That single move, characterized in the lawsuit as Jane Street’s largest-ever single swap, is described as a turning point in the market’s confidence in TerraUSD.
The lawsuit claims this triggered the market panic that sent TerraUSD spiraling off its dollar peg, ultimately erasing $40 billion in value. The timing is hard to explain away. Ten minutes is not a coincidence. It is a trade.
The Back-Channel That Leaked It All
Jane Street’s relationship with Terraform dates back to 2018, when the firm was brought on as a liquidity and market-making partner. Activity on the account reportedly surged in 2022, after Bryce Pratt, a former Terraform intern, reconnected with his old colleagues at the company. Pratt is accused of creating a private communication channel with Terraform’s business development lead, described in the complaint as a “back-channel source for material non-public information.”
On May 9, Pratt sent a group message to Do Kwon and Terraform staff, floating offers to buy Bitcoin or Luna. It reads less like a rescue offer and more like a firm positioning itself while holding all the information.
The lawsuit also names Jane Street co-founder Robert Granieri and employee Michael Huang alongside Pratt as defendants.
Jane Street’s Defense: Blame the Fraud
Jane Street has called the lawsuit a “desperate” and “baseless” attempt to extract money, with a spokesman stating that losses suffered by Terra and Luna holders were the result of a “multibillion-dollar fraud” perpetrated by Terraform’s own management.
It is a reasonable deflection on its face. Do Kwon did commit fraud. He pleaded guilty and was sentenced to 15 years in a U.S. prison. Terraform also agreed to pay the $4.47 billion in penalties. But Terraform’s guilt does not automatically excuse profiting from insider knowledge of its collapse. Both things can be true.
The Jump Trading Thread Running Through It All
This lawsuit does not stand alone. Last December, Snyder sued Jump Trading and its top executives (co-founder William DiSomma and former Jump Crypto president Kanav Kariya), claiming Jump “actively exploited” the Terraform ecosystem through a backdoor deal to inflate the value of TerraUSD before it imploded, seeking $4 billion in damages (plus other relief) under fraud, manipulation, and fraudulent transfer claims. Snyder alleges Jump was also involved in circulating confidential information to Jane Street. Jump has denied the claims.
These are not isolated; they are part of Snyder’s broader efforts to recover assets for Terraform creditors and victims.
What is taking shape is a picture of Wall Street’s most sophisticated trading firms sitting at the center of crypto’s worst disaster. Not just as bystanders, but as alleged participants with a front-row seat and advance notice.
What Comes Next
Legal experts note that insider trading claims in crypto are complex, since courts must decide what counts as securities and what constitutes material non-public information in token markets. If the claims proceed, Jane Street may need to disclose internal communications and trading data tied to TerraUSD, a discovery process that could expose how major market makers manage risk when protocols begin to fail.
The message? It’s becoming clear to the broader crypto market that the firms that claimed to be providing liquidity may have been extracting it. That question now belongs to a federal judge.
Jane Street Responds
According to reports, Jane Street desks were given an urgent memo to immediately cease “manipulative Bitcoin trading activity” — with algos reportedly shut down. This is not confirmed, but it is trending on X.
Author: Richardson Chinonyerem
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
Jane Street’s ’10am Bitcoin Dumps’: Manipulation Myth or TradFi Reality? | Disruption Banking
How Jane Street’s Tech-Driven Market-Making is Reshaping Wall Street | Disruption Banking