Terraform Labs’ bankruptcy estate has sued quantitative trading giant Jane Street, accusing the company of using non-public information to profit from the collapse of its stablecoin TerraUSD in May 2022, according to documents filed in the Southern District Court of New York yesterday.
In a Wall Street Journal report on the lawsuit, Terraform Labs public administrator Todd Snyder said Jane Street “abused its market relationships” to short the ecosystem during its death spiral, echoing similar allegations made against Jump Trading late last year.
The foundation aims to recover funds for creditors who lost billions of dollars in the $40 billion erasure of the Terra ecosystem.
Important points
- The complaint alleges that Jane Street misused private liquidity data to profit from depegging TerraUSD without the public’s knowledge.
- Terraform’s estate claims the trading company made millions of dollars in profits by bringing forward a critical $150 million liquidity withdrawal from Curve.
- Jane Street dismissed the lawsuit as a “desperate” attempt to extract money from legitimate market activities.
Estate targets ‘privileged access’ in crash recovery
The lawsuit focuses on a specific operation carried out in May 2022, just as the algorithmic stablecoin UST began losing its peg to the US dollar.
Terraform Labs’ court-appointed planning administrator, Todd Snyder, alleges that Jane Street took advantage of vulnerabilities in Terra’s mint-and-burn mechanism through manipulative transactions.
“Jane Street abused market relationships to manipulate the market to its advantage during one of the most significant events in crypto history,” Snyder claimed in a statement to the Journal.
The foundation contends that these trades were based on nonpublic information about Terraform’s internal liquidity management, rather than simply shrewd market moves.
The legal action is part of a broader recovery effort after the company filed for Chapter 11 bankruptcy, which listed assets and liabilities of between $100 million and $500 million, just a fraction of the market value destroyed in the bankruptcy.
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Curb pool incident
The complaint reportedly highlights a series of pivotal events involving Curve3pool, a key liquidity venue for stablecoins.
According to the filing, Terraform Labs withdrew $150 million from the pool without notice to adjust liquidity. In less than 10 minutes, $85 million was withdrawn from a wallet allegedly associated with Jane Street.
The estate argues that this timing shows that Jane Street had “prior insight” into Terraform’s operations and used that data to position itself ahead of the resulting market panic.
This reflects the scrutiny of liquidity changes in the current market, where traders relentlessly monitor the order book and polymarket odds of a Bitcoin price decline to detect institutional positioning before a price change occurs.
Jane Street categorically denies the allegations.
Impact on DeFi and stablecoin regulation
If courts find merit in the “misappropriation doctrine” applied to DeFi protocols, the legal obligations of market makers in the crypto sector could be redefined.
This case suggests that “privileged access” in decentralized finance is not just a competitive advantage, but a legal liability.
The legal battle comes as the regulatory environment for stablecoins intensifies. While the 2022 collapse serves as a warning, modern stablecoins will drive $1 trillion in T-bill demand and create a different set of systemic risks and incentives.
Regulators are currently scrutinizing how private trading companies interact with issuer protocols.
This result could also accelerate the legal framework. Lawmakers could cite these claims to call for stricter separation between protocol issuers and market makers as the odds of stablecoin negotiations over the Transparency Act soar.
what happens next
The case now moves to the discovery phase in Delaware, where Jane Street will be required to produce communications regarding its 2022 trading strategy.
This follows a similar $4 billion lawsuit by Terraform Labs against Jump Trading in December, accusing the company of materially contributing to the destabilization of the Terra ecosystem.
Major Update on Terraform Labs Bankruptcy: Plan Administrator Files Lawsuit Against Jump Trading!
On December 18, 2025, a bombshell indictment was filed in Illinois federal court (Case 1:25-cv-15414) targeting Jump Trading, its former Crypto president Kanav Kariya, and also Do Kwon. pic.twitter.com/3uhmVNBCzF— Z3r0w
Traders (@_Z3r0wTraders) February 18, 2026
Terraform appears to be in for the long haul on at least two different fronts, potentially opening the door to high-frequency trading strategies in the crypto market crisis.
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The article Terraform Estate sues Jane Street over transactions related to 2022 crypto collapse appeared first on Cryptonews.
