Crypto Firm Jane Street Sued: Did They Trigger the $40B Crypto Crash?

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In a turn of events that will surely make you question your faith in digital currencies, the administrator overseeing Terraform Labs’ winding down has sued Jane Street, the seemingly innocent trading firm, for using material non-public information from Terraform insiders to profit off the May 2022 collapse of TerraUSD (UST) and Luna. Sounds like a plot straight out of a financial thriller, doesn’t it?

The complaint, which is now gracing the halls of Manhattan federal court, was filed by Todd R. Snyder, the bankruptcy administrator for Terraform. The lawsuit targets not only Jane Street entities but also a few select individuals, including Bryce Pratt. They’re being accused of insider trading, fraud, and the ever-popular market manipulation. All of this, of course, during the infamous depeg crisis. The case demands damages and disgorgement, with any recovery aimed at compensating Terraform’s creditors. How nice of them, really.

Did Jane Street Cause The $40 Billion Crypto Crash?

Now, here comes the juicy part: Bryce Pratt. He’s the alleged mastermind who went from a humble internship at Terraform to a cushy position at Jane Street while maintaining a backdoor line of communication with Terraform personnel. Oh, the drama. The complaint reveals that Pratt kept passing along sensitive, confidential information-messages which, according to the plaintiffs, were clearly marked with the classic, “don’t share pls.” (Because who doesn’t love a little shady cryptic message?)

Apparently, Pratt wasn’t just making idle chit-chat with Terraform employees. No, no. He allegedly asked them what Jane Street was up to behind the scenes. This, according to the plaintiffs, proves that Jane Street wasn’t just taking advantage of the market’s volatility. Instead, they had a “private informational edge” that helped them navigate the financial storm when everyone else was relying on public signals and rapidly vanishing liquidity. A true insider move, if you will.

But wait, there’s more! The lawsuit delves deep into the market chaos surrounding the early stages of UST’s depeg and liquidity movements on Curve. Snyder claims that after Terraform adjusted liquidity in Curve’s 3pool, Jane Street swooped in with a massive 85 million UST trade, making it “the largest single swap on the Curve 3pool.” And guess what? That trade allegedly sparked a chain reaction, causing the steep sell-off in UST that ultimately led to the Terra ecosystem’s catastrophic collapse. Talk about a butterfly effect.

The fun doesn’t stop there. According to the filing, as conditions worsened over May 8 and 9, UST’s trading volume surged, and the token plummeted below $0.80 while Terraform scrambled to defend the peg. Ah, the drama of watching a stablecoin crash and burn. But hey, they tried, right?

This whole sequence is pivotal to the plaintiff’s argument, as they attempt to connect the dots between alleged insider information and a specific trading action, which, of course, caused massive damage during the unwinding process. Makes you wonder if this whole crypto crash was really a case of bad luck, or something a little more… calculated.

The complaint also cites direct communications during the crisis. In one of the May 9 messages, Pratt allegedly wrote to Terraform’s Do Kwon: “Hey Do Kwon, just wanted to express our interest in bidding on either BTC or LUNA.” Kwon, being the ever-helpful individual, supposedly responded that “Bill from Jump” should have already contacted Jane Street about a Terraform fundraise. That little exchange is being used to argue that Jane Street wasn’t just a passive market player-they were actively engaged with Terraform’s leadership while discussions about emergency options were in full swing. A little too cozy, don’t you think?

Jane Street, naturally, has denied the allegations and is gearing up for a legal battle of epic proportions. Expect them to argue over whether the information was truly material and non-public, whether the trades were directly responsible for the crash, and whether the plaintiff can actually prove any intent. Should be an exciting courtroom drama.

As of press time, the total crypto market cap stands at a somewhat staggering $2.17 trillion. So, if you had any hopes left for crypto’s future, there’s still a bit of sparkle in the void.

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2026-02-24 14:41