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A new development has occurred in the case of Terraform Labs, which is currently undergoing bankruptcy and liquidation proceedings.
According to the Wall Street Journal (WSJ), Todd Snyder, the liquidator of Terraform Labs, has filed a new lawsuit against Jane Street, a leading U.S. market maker, alleging that it engaged in insider trading that accelerated the collapse of Terra-Luna.
Todd Snyder alleges that Jump Trading, another company he sued last year, was involved in the dissemination of confidential information along with Jane Street.
Snyder alleges that Jane Street used confidential information obtained from inside Terraform Labs to pre-order shares.
Snyder stated, “Jane Street abused market relations to manipulate the market to its advantage in one of the most significant events in crypto history.”
According to the allegations in the lawsuit, shortly after Terraform Labs withdrew $150 million UST from Curve Pool 3 on May 7, 2022, approximately $85 million UST was withdrawn from a wallet identified as being linked to Jane Street. At this point, Snyder claims that the timing of the withdrawal by Jane Street is significant, given that Terraform Labs’ withdrawal occurred before it was publicly disclosed.
Therefore, it is alleged that this series of transactions led to illicit profits and accelerated the collapse of Terraform Labs.
Jane Street stated: “The losses suffered by Terra and Luna investors are due to large-scale fraud by Terraform management. We will strongly defend ourselves against this baseless, opportunistic lawsuit. This lawsuit is an additional legal action following a previous lawsuit filed by the liquidator against Jump Trading.”
What Happened?
The decline that began in May 2022 with Terraform Labs’ algorithmic stablecoin TerraUSD (UST) losing its dollar value continued with the devaluation of the altcoin Luna (LUNA).
Ultimately, the Terra collapse triggered a chain reaction leading to the bankruptcy of FTX. Terraform Labs finally filed for bankruptcy in January 2024, and a liquidation fund was established. Founder Do Kwon pleaded guilty and was sentenced to 15 years in prison.
*This is not investment advice.