The bankruptcy administrator for Terraform Labs has slapped trading firm Jane Street with a lawsuit alleging insider trading and market manipulation during the infamous 2022 Terra collapse. This high-stakes legal battle revives painful memories of the $40 billion wipeout that rocked markets and sent shockwaves through the industry.

The Terra Collapsea

In May 2022, TerraUSD (UST), the algorithmic stablecoin meant to hold a steady $1 peg, suddenly spiralled out of control. Its sister token Luna, plummets in a death spiral, vaporizing roughly $40 billion in value overnight. Terraform Labs, the brains behind it all, files for bankruptcy in 2024 after co-founder Do Kwon admits to fraud and lands a 15-year sentence. Billions in investor losses later, enter Todd Snyder, the court-appointed administrator tasked with clawing back funds for creditors.

What Terraform Alleges?

Filed Monday in Manhattan federal court, the complaint pulls no punches. Snyder accuses Jane Street of misappropriating confidential info to front-run trades. The duo connected in 2018 for OTC deals, but things heated up in February 2022 when Pratt, leveraging his old internship ties, allegedly funnelled non-public details on Terraform's liquidity moves straight to Jane Street's crypto desk. The Key claim is that Jane Street knew about massive withdrawals from the Curve 3pool, dumped $85 million in UST just minutes later, and unwound hundreds of millions in exposure right before the peg broke. This "hastened the collapse," per the suit, turning inside knowledge into profits while everyday holders got crushed. Snyder calls it "rigging the market" during crypto's darkest hour. The remedy sought: disgorge those ill-gotten gains, plus interest, and a jury trial.

Jane Street Fires Back

Not so fast, says Jane Street. A spokesperson dismissed the claims as a "desperate" cash grab, pinning Terra's woes squarely on Terraform's own "multibillion-dollar fraud" by management. They'll fight tooth and nail, arguing the suit is opportunistic at best. It's a classic Wall Street vs Crypto showdown with billions on the line.​

What's Next

This isn't Snyder's first rodeo; a similar $4 billion suit hit Jump Trading in December over secret Kwon deals. As LUNC (Luna Classic) holders cheer "things are about to get interesting," the case could redefine insider trading rules in decentralized finance. Will it expose more rot in crypto's underbelly or fizzle as deflection? Eyes on the court. For Terra victims, it's a glimmer of justice in a saga of greed and innovation gone wrong.