Jane Street Files Motion to Dismiss Terraform Labs' Insider Trading Lawsuit

Gate News message, April 24 — Jane Street has filed a motion to dismiss the lawsuit brought by Terraform Labs’ bankruptcy estate, which accuses the quant trading firm of precipitating the collapse of the UST/LUNA algorithmic stablecoin. The motion was filed at the Southern New York District Court.

Jane Street and individual defendants argue the lawsuit is a meritless attempt by Terraform to shift blame for the ecosystem’s collapse, stating “this case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.” The defendants requested the court throw out the entire lawsuit with prejudice, preventing Terraform from refiling the same claims. Jane Street emphasized that Terraform’s fraud scheme has already been prosecuted and adjudicated, noting that Terraform founder Do Kwon pleaded guilty to conspiracy and wire fraud charges in December and is currently serving a 15-year prison sentence.

Regarding insider trading allegations, Jane Street argued Terraform’s claims are “self-defeating,” as the firm’s largest trades occurred after material information about UST/LUNA’s health was made public. The filing noted Jane Street began acquiring a short position on May 8 and sold assets on May 7, but Terraform failed to identify material non-public information or specific back-channel communications that would have given Jane Street an advantage. Jane Street also cited the Wagoner rule, which prevents bankruptcy estates from suing third parties to recover losses caused by their own fraud, and argued the claims lack proper jurisdictional basis.