Jane Street sued for alleged front-running trades that accelerated Terraform Labs meltdown

The bankruptcy plan administrator of Terraform Labs, Todd Snyder, has filed a lawsuit against Jane Street Group for alleged front-running trades that allowed the trading powerhouse to profit from non-public information obtained from Terraform insiders, The Wall Street Journal reported Monday.

The complaint, submitted in Manhattan federal court, claims these trades not only enriched Jane Street but also contributed to the rapid collapse of the TerraUSD (UST) stablecoin and LUNA in May 2022.

The lawsuit also names Jane Street co-founder Robert Granieri and employees Bryce Pratt and Michael Huang as defendants.

Terraform’s implosion in May 2022 wiped out roughly $40 billion in value when its dollar-pegged stablecoin TerraUSD lost its anchor, and sister token Luna plunged to nearly zero within days.

Snyder has separately pursued a $4 billion claim against Jump Trading, alleging the firm orchestrated market manipulation by initially propping up TerraUSD before withdrawing support, generating approximately $1 billion in gains.

Manhattan federal prosecutors previously reviewed Telegram chats between staff at Jump Trading, Jane Street, and Alameda Research related to a proposed TerraUSD rescue.

The probe focused on whether these communications could have constituted market manipulation in the lead-up to the stablecoin’s collapse, which left UST and Luna essentially worthless and triggered a wave of bankruptcies, including Three Arrows Capital, Voyager Digital, and FTX.

Terraform founder Do Kwon pleaded guilty to fraud charges tied to misleading statements about the stablecoin’s stability mechanisms and received a 15-year prison sentence.