Terraform Labs’ Administrator Sues Jane Street Over Alleged Insider Trading
Manhattan, Feb 24 2026 – Todd Snyder, the court‑appointed administrator overseeing the Chapter 11 bankruptcy of Terraform Labs, has filed a civil complaint in the U.S. District Court for the Southern District of New York accusing the global quantitative trading firm Jane Street, its co‑founder Robert Granieri, and two senior staff members of insider trading that allegedly accelerated the collapse of the Terra ecosystem in May 2022.
The lawsuit
The complaint, which is heavily redacted, alleges that Jane Street leveraged non‑public information obtained through former Terraform insiders to execute large‑scale trades of Terra‑linked tokens moments before a critical liquidity event. According to the filing, Jane Street sold roughly $85 million worth of the algorithmic stablecoin TerraUSD (UST) into a liquidity pool within ten minutes of Terraform Labs withdrawing 150 million UST from the same pool on May 7 2022. The filing describes the trade as the firm’s “largest‑ever single swap” and contends that the rapid sell‑off triggered a fire‑sale that contributed to the subsequent destabilisation of UST and the broader Terra network.
Snyder’s complaint also alleges that Jane Street’s relationship with Terraform dates back to 2018, but that significant trading activity only emerged after a former Terraform intern, Bryce Pratt, re‑established contact with his former colleagues in 2022. The complaint asserts that Pratt facilitated a “back‑channel” that supplied material non‑public information, including a group chat that reportedly involved Terraform’s co‑founder Do Kwon.
The administrator is seeking monetary damages, disgorgement of profits, interest, and a jury trial.
Jane Street’s response
Jane Street, through a spokesperson, rejected the allegations as “baseless” and “opportunistic.” The firm characterised the lawsuit as a “desperate attempt to extract money,” noting that the losses suffered by Terra and Luna token holders resulted from a multi‑billion‑dollar fraud perpetrated by Terraform’s management, rather than any misconduct by third‑party traders.
Background on Terraform’s downfall
Terraform Labs launched TerraUSD (UST), an algorithmic stablecoin designed to maintain a 1:1 peg with the U.S. dollar through a supply‑adjustment mechanism linked to the Terra token (LUNA). In May 2022, UST lost its peg, triggering a cascading “death spiral” that erased roughly $40 billion in market value and led to the de‑listing of both tokens across major exchanges. Terraform filed for U.S. bankruptcy protection in 2024, and its co‑founder Do Kwon was subsequently arrested, pleaded guilty to two fraud charges, and was sentenced to 15 years in prison in December 2025.
Analysis
The lawsuit adds to a growing wave of litigation targeting the ecosystem surrounding Terra’s collapse. Earlier this year, Jump Trading faced a $4 billion claim for allegedly profiting from the same market turmoil. If the allegations against Jane Street are substantiated, the case could set a precedent for how regulators and courts treat the use of insider information within the decentralized finance (DeFi) space—a sector where traditional market‑abuse frameworks are still evolving.
From a legal perspective, the key question will be whether the court finds sufficient evidence that Jane Street obtained and acted upon material non‑public information, and whether that conduct directly contributed to the market destabilisation. The redacted nature of the complaint makes it difficult to assess the strength of the evidence at this stage.
For the broader crypto market, the case underscores the heightened scrutiny on trading firms that operate across both traditional and crypto markets. Firms that engage in high‑frequency or algorithmic trading of digital assets may increasingly be required to demonstrate robust compliance programs to avoid similar accusations.
Key takeaways
- Administrator’s claim: Terraform’s court‑appointed administrator alleges Jane Street used insider information to sell large amounts of UST shortly before a pivotal liquidity withdrawal, worsening the collapse.
- Jane Street’s stance: The firm denies any wrongdoing, calling the suit a baseless attempt to secure financial compensation.
- Potential precedent: If successful, the case could shape how insider‑trading rules are applied to crypto markets and influence compliance expectations for trading firms.
- Ongoing litigation: The lawsuit joins other high‑profile actions related to Terra’s demise, reflecting intensified legal pressure on parties that profited from the crash.
- Outcome uncertain: The heavily redacted complaint leaves many factual details undisclosed; the case will likely hinge on the ability of the administrator to prove causation and material non‑public information.
The lawsuit is still in its early stages, and further filings, discovery, and possible settlement talks will provide additional clarity on the merits of the claims and their implications for the crypto trading landscape.
Source: https://cointelegraph.com/news/terraform-admin-sues-jane-street-pins-collapse-on-alleged-insider-trading?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
