Terraform Labs’ bankruptcy estate has sued quant trading giant Jane Street, alleging the company used non-public information to profit from the May 2022 collapse of stablecoin TerraUSD, according to a filing yesterday in New York’s Southern District Court.
In a Wall Street Journal report on the lawsuit, Terraform Labs court-appointed administrator Todd Snyder said Jane Street “abused market relationships” to short the ecosystem during its death spiral, mirroring similar allegations made against Jump Trading late last year.
The estate is seeking to recoup funds from creditors who lost billions in the $40 billion wipeout of the Terra ecosystem.
Key takeaways
- The lawsuit alleges that Jane Street exploited private liquidity data to profit from the depegging of TerraUSD before the public became aware of it.
- The Terraform estate claims the trading company made millions by making a critical $150 million cash withdrawal from Curve.
- Jane Street dismissed the complaint, calling it a “desperate” attempt to extract money from legitimate market activities.
Estate targets ‘privileged access’ during crash recovery
The lawsuit focuses on specific maneuvers executed in May 2022, just as the algorithmic stablecoin UST began to lose its peg to the US dollar.
Terraform Labs’ court-appointed scheme administrator, Todd Snyder, alleges that Jane Street capitalized on vulnerabilities in Terra’s creation and burning mechanism through manipulative transactions.
“Jane Street abused market relationships to rig the market in its favor during one of the most significant events in crypto history,” Snyder claimed in his statement to the WSJ.
The estate argues that these transactions were not simply shrewd market moves, but relied on non-public information regarding Terraform’s internal liquidity management.
The lawsuit is part of a broader recovery effort following the company’s Chapter 11 bankruptcy filing, which listed assets and liabilities at between $100 million and $500 million, a fraction of the market value destroyed in the collapse.
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Inside the Curve Pool Incident
The complaint allegedly highlighted a pivotal sequence of events involving the Curve3pool, a critical liquidity venue for stablecoins.
According to the filing, Terraform Labs made an unannounced withdrawal of $150 million from the pool to adjust liquidity. Less than 10 minutes later, a wallet allegedly linked to Jane Street withdrew $85 million.
The estate claims that this timing indicates that Jane Street had “advanced insight” into Terraform’s operations, using that data to position itself before the resulting market panic.
This reflects the intense scrutiny placed on liquidity changes in today’s markets, where traders obsessively monitor Polymarket order books and quotes for Bitcoin price declines to detect institutional positioning before price action occurs.
Jane Street strongly denies these allegations.
Implications for DeFi and Stablecoin Regulation
If the court finds the “misappropriation theory” applied to DeFi protocols useful, it could redefine the legal obligations of market makers in the crypto sector.
The lawsuit suggests that “privileged access” to decentralized finance is a legal liability, not just a competitive advantage.
This legal battle comes as the regulatory environment for stablecoins intensifies. Although the 2022 collapse serves as a warning, modern stablecoins generate $1 trillion in demand for Treasuries, creating a different set of systemic risks and incentives.
Regulators are currently examining how private trading companies interact with issuer protocols.
The result could also accelerate legislative frameworks. As the odds increase for stablecoin negotiations regarding the Clarity Act, lawmakers may cite these allegations to demand stricter separation between protocol issuers and market makers.
What comes next
The case now moves to the discovery phase in Delaware, where Jane Street will be required to produce communications regarding its 2022 business strategies.
This follows a similar $4 billion lawsuit filed by Terraform Labs against Jump Trading in December, which accused the company of materially contributing to the instability of the Terra ecosystem.
Major Update in Terraform Labs Bankruptcy: Plan Administrator Files Lawsuit Against Jump Trading!
On December 18, 2025, an explosive lawsuit was filed in Illinois federal court (case 1:25-cv-15414) targeting Jump Trading, its former Crypto President Kanav Kariya, and even Do Kwon… pic.twitter.com/3uhmVNBCzF
-Z3r0w
Traders (@_Z3r0wTraders) February 18, 2026
Traders (@_Z3r0wTraders) It appears that Terraform is entering a protracted battle on at least two different fronts that could lift the lid on high-frequency trading strategies during crypto market crises.
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The article Terraform Estate Sues Jane Street Over Transactions Related to 2022 Crypto Collapse appeared first on Cryptonews.
