Terraform Labs has filed a lawsuit accusing trading firm Jane Street of insider trading tied to UST and LUNA trades before the Terra ecosystem collapsed in May 2022. The suit claims Jane Street used non‑public information and special trading arrangements to profit while retail investors faced massive losses.
What Terraform Alleges Against Jane Street
In the complaint, Terraform says it entered into an agreement with Jane Street to help support the UST peg during periods of stress. The firm alleges Jane Street instead used its position to front‑run or trade against the peg while knowing Terraform’s defense plans.
Terraform argues that this conduct amounted to insider trading because Jane Street allegedly held confidential details about rescue operations and liquidity injections. The company claims these trades deepened the depeg and accelerated the collapse of UST and LUNA.
The lawsuit also says Jane Street’s trading profits came at the direct expense of ordinary Terra users who held UST believing it would stay close to one dollar. Terraform is seeking damages and a return of alleged wrongful gains, though the exact amount will depend on court findings.
How This Fits Into Terraform’s Wider Legal Battles
The case against Jane Street lands while Terraform and its co‑founder Do Kwon already face major actions from U.S. regulators over the Terra collapse. The SEC has accused Terraform of misleading investors about UST’s stability and about rescue efforts during earlier depeg events.
By suing Jane Street, Terraform is trying to shift part of the blame to a major market‑making firm that operated in Terra’s markets during the crisis. The filing suggests Terraform will argue that some of the worst price action came from sophisticated players, not just from flaws in the algorithmic design.
Legal experts note that insider trading claims in crypto can be complex because courts must decide what counts as “securities” and what counts as material non‑public information in token markets. They also say the case could expose more details about how large trading firms interacted with Terra and other algorithmic stablecoins before and during the crash.
If a court allows Terraform’s claims to proceed, Jane Street may need to disclose internal communications and trading data tied to UST. That discovery process could shed light on how big market makers manage risk and use information when protocols start to fail.
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