Terraform Labs' court-appointed bankruptcy administrator Todd Snyder filed a lawsuit in Manhattan federal court on February 24, 2026, accusing Jane Street Group, co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang of insider trading that allegedly accelerated the $40 billion Terra ecosystem collapse in May 2022.
An 85 Million UST Sale Inside a Ten-Minute Window
The complaint centers on a specific sequence of events on May 7, 2022. Terraform Labs withdrew 150 million TerraUSD (UST) from the Curve3pool liquidity pool without making a public announcement. Within ten minutes, a wallet allegedly linked to Jane Street sold 85 million UST into the same pool, what the filing describes as Jane Street's largest-ever single swap.
The timing is the core of the case. Snyder argues Jane Street could not have known about Terraform's unannounced withdrawal through public channels. The complaint alleges the firm obtained that information through a back channel built by Bryce Pratt, a former Terraform Labs intern who later joined Jane Street.
According to the filing, Pratt reestablished contact with former Terraform colleagues in 2022 and built a direct communication line with Terraform's business development lead. The complaint also references a group chat that included Terraform co-founder Do Kwon. Snyder claims this pipeline fed non-public information to Jane Street, which the firm used to position trades ahead of the collapse.
The $40 Billion Unraveling and Who Profited
The Terra ecosystem implosion in May 2022 wiped approximately $40 billion in value and triggered a cascade of failures across the crypto industry. Three Arrows Capital, Voyager Digital, and eventually FTX all collapsed in the aftermath. Do Kwon pleaded guilty to fraud charges and was sentenced to 15 years in prison in December 2024 for misleading investors about how TerraUSD maintained its dollar peg.
The lawsuit paints Jane Street not as a passive market participant but as an active beneficiary of the collapse. Snyder alleges the firm sold at "precisely the right time, mere hours before the Terraform ecosystem collapsed." The complaint seeks damages, disgorgement of profits, and interest, with the case headed toward a jury trial.
This is not the only legal action stemming from the crash. Snyder previously filed a separate $4 billion lawsuit against Jump Trading, another major quantitative firm, alleging a similar pattern of insider knowledge and front-running. Manhattan federal prosecutors have also examined Telegram conversations among Jump Trading, Jane Street, and Alameda Research personnel discussing a proposed UST rescue operation, raising questions about whether multiple trading desks shared material non-public information during the crisis.
Jane Street Fires Back
Jane Street responded to the lawsuit by calling it a "desperate suit" and a "transparent attempt to extract money." The firm's statement pointed the blame squarely at Terraform's own management, arguing that "losses suffered by Terra and Luna holders were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs."
The defense strategy is clear: Jane Street will argue that the collapse was inevitable regardless of any individual trade, and that the real criminals, Do Kwon and his team, have already been convicted. Whether a jury agrees that a single 85 million UST swap materially accelerated a $40 billion collapse remains an open question.
Jane Street is one of the most powerful quantitative trading firms in the world, with estimated annual trading revenues exceeding $20 billion. The firm is a major market maker in crypto ETFs, equities, bonds, and options globally. A finding of insider trading would carry implications far beyond this single case, potentially inviting regulatory scrutiny of how quantitative firms interact with crypto project teams.
What This Means for Crypto Market Structure
The lawsuit exposes a structural vulnerability in crypto markets that traditional finance has spent decades trying to regulate: the revolving door between project teams and trading desks. In traditional equities, information barriers (commonly called Chinese walls) separate investment banking teams from trading desks within the same firm. Crypto has no equivalent framework.
The allegation that a former intern could build a back channel from a trading firm to a project's inner circle, including the co-founder, and feed trade-relevant information back to the desk, is not a fringe scenario. It describes a pattern that likely exists across multiple projects and multiple desks. If the court finds merit in Snyder's claims, it could establish precedent for how insider trading laws apply to DeFi liquidity pools and algorithmic stablecoin mechanics.
For retail investors and crypto card users, the practical lesson is about counterparty risk. The Terra collapse did not just wipe out speculators. It destroyed wallets, balances, and yield positions held by ordinary users who trusted the system's stability. Anyone holding UST in a staking position or using it as a spending balance lost everything overnight. The new allegations suggest that while retail holders were caught off guard, at least one major trading firm may have known what was coming and acted on it.
The case also connects to the broader question of market integrity in crypto ETF markets. Jane Street is a significant authorized participant and market maker for multiple crypto products. If the firm is found to have engaged in insider trading in one part of the crypto market, it raises questions about information handling across all of its crypto activities.
The Expanding Web of Terra Litigation
This filing is the latest in a growing constellation of lawsuits attempting to trace responsibility for the Terra collapse beyond Do Kwon himself. The $4 billion claim against Jump Trading alleges the firm generated approximately $1 billion in profits from trades informed by insider knowledge. Manhattan prosecutors have reviewed communications showing representatives from Jump Trading, Jane Street, and Alameda Research discussing coordinated efforts around UST.
The pattern Snyder is building across multiple lawsuits suggests he believes the collapse was not simply the result of a flawed algorithm, but was accelerated by sophisticated trading firms that profited from advance knowledge. If the legal theory holds, it could reshape how bankruptcy estates pursue claims against market makers and liquidity providers in future crypto failures.
The case will proceed in Manhattan federal court. No trial date has been set as of February 24, 2026.
FAQ
What is Jane Street accused of doing? Terraform's bankruptcy administrator alleges Jane Street used non-public information obtained through a former Terraform intern to execute an 85 million UST sale within ten minutes of an unannounced Terraform withdrawal from Curve3pool, profiting from the collapse.
How does this connect to the Jump Trading lawsuit? The same administrator, Todd Snyder, filed a $4 billion claim against Jump Trading for similar insider trading allegations. Prosecutors have examined communications between Jane Street, Jump Trading, and Alameda Research personnel, suggesting a possible information-sharing network.
What happened to Do Kwon? Terraform co-founder Do Kwon pleaded guilty to fraud charges and was sentenced to 15 years in prison in December 2024 for misleading investors about TerraUSD's stability mechanism.
Could this affect Jane Street's other crypto business? Jane Street is a major market maker in crypto ETFs and OTC trading. An insider trading finding could invite regulatory scrutiny of the firm's information barriers across all crypto activities.
Overview
Terraform Labs' bankruptcy administrator Todd Snyder sued Jane Street in Manhattan federal court on February 24, 2026, alleging the quantitative trading firm used insider information from a former Terraform intern to front-run the $40 billion Terra collapse. The complaint cites an 85 million UST sale executed within ten minutes of an unannounced Terraform withdrawal from Curve3pool. Jane Street denies the claims, calling the suit a "desperate" money grab. The case joins a $4 billion action against Jump Trading and connects to broader questions about insider trading in DeFi markets. No trial date has been set.
Recommended Reading
- Elliptic Names Five Crypto Exchanges Filling Garantex's Void as Russia's Sanctions Evasion Network Rebuilds
- KuCoin EU Banned by Austria After AML Officers Vanish
- Gemini Stock Crashes 82 Percent From IPO as Winklevoss Exchange Exits Three Continents
