$40B Crypto Crash: Jane Street Sued Over Terra Insider Trading

Crypto firm Terraform Labs’ wind-down administrator has sued Jane Street in Manhattan federal court, alleging the trading firm used material non-public information from Terraform insiders to trade around the May 2022 collapse of TerraUSD (UST) and Luna.

The complaint was filed by Todd R. Snyder, the administrator overseeing recoveries tied to Terraform’s bankruptcy wind-down. It names Jane Street entities and several individuals, including Bryce Pratt, and accuses the defendants of insider trading, fraud, and market manipulation tied to trading during the depeg crisis. The suit seeks damages and disgorgement, with any recovery intended to support creditor distributions.

Did Jane Street Cause The $40 Billion Crypto Crash?

A central part of the case is the role of Pratt, who allegedly moved from an internship at Terraform to a position at Jane Street while maintaining contact with Terraform personnel. The complaint claims he kept a confidential back channel with Terraform’s head of research and passed along sensitive information.

The filing quotes messages that, according to the plaintiff, show both the existence of confidential communications and an understanding that the information should not be shared. One message allegedly included the phrase “don’t share pls.” The complaint also claims Terraform personnel asked Pratt what Jane Street was discussing internally.

That point is critical to the plaintiff’s theory. The case is not framed as Jane Street simply trading aggressively during a volatile market event. It is framed as a claim that Jane Street had a private informational edge at a moment when the market was relying on public signals and deteriorating liquidity.

The lawsuit’s market narrative centers on the early phase of the UST depeg and liquidity movements on Curve. Snyder alleges that after Terraform adjusted liquidity in Curve’s 3pool, a Jane Street-linked 85 million UST trade hit the pool and became “the largest single swap on the Curve 3pool.”

The complaint goes further, alleging that this trade “precipitated a steep sell off in UST” and helped trigger the broader collapse of the Terra ecosystem. It also describes how conditions worsened over May 8 and 9, with UST trading volume surging and the token falling below $0.80 as Terraform attempted to defend the peg.

This sequence matters because the plaintiff is trying to connect alleged access to non-public information with a specific trading action and then link that action to damages suffered during the unwind.

The suit also cites direct communications during the meltdown. In one May 9 message referenced in the complaint, Pratt allegedly wrote to Do Kwon: “Hey Do Kwon, just wanted to express our interest in bidding on either BTC or LUNA.”

According to the filing, Kwon responded that “Bill from Jump” should have contacted Jane Street regarding a Terraform fundraise. The plaintiff uses that exchange to argue that Jane Street was not just an outside trading firm reacting to market prices, but was in direct communication with Terraform leadership while emergency options were being discussed.

Jane Street has pushed back on the allegations and is expected to contest the claims aggressively. As in other post-Terra litigation, key issues will likely include whether the information was truly material and non-public, whether the trades were causally connected to the collapse, and whether the plaintiff can prove intent.

At press time, the total crypto market cap stood at $2.17 trillion.