Jane Street sued over alleged insider trades during Terra’s $40 billion UST collapse

Jane Street Group, one of Wall Street’s largest quantitative trading firms, is facing a lawsuit from Terraform Labs’ bankruptcy administrators alleging it used non-public information to execute large trades ahead of the 2022 UST collapse — allegations the firm has strongly denied.

Quantitative trading powerhouse Jane Street Group is now confronting allegations of insider trading, regulatory pressure across multiple jurisdictions.

Lawsuit reignites scrutiny over Terra’s $40 billion collapse

Jane Street Group came under fresh attention this week after administrators connected to Terraform Labs filed a lawsuit alleging the firm used non-public information to profit during the dramatic collapse of the TerraUSD (UST) stablecoin.

The complaint claims Jane Street gained insider knowledge through relationships with Terraform personnel and executed large trades shortly before the ecosystem unraveled.

According to court filings, the firm allegedly sold tens of millions of TerraUSD tokens into liquidity pools shortly after undisclosed internal actions by Terraform, accelerating the sell-off that triggered the collapse.

Terraform’s bankruptcy administrator is seeking damages, disgorgement of profits, and a jury trial.

The lawsuit also alleges violations including securities fraud and unjust enrichment. Jane Street has strongly denied the accusations.

“This desperate suit is a transparent attempt to extract money.” Jane Street spokesperson, statement reported by Cointelegraph.

The legal battle revives unresolved questions about whether sophisticated trading firms amplified volatility during one of crypto’s most devastating failures.

X account controversy fuels market speculation

Amid growing legal pressure, observers noticed that Jane Street’s official account on X (formerly Twitter) appeared to show zero posts.

Initial reports suggested the wipe occurred shortly after the lawsuit became public, reinforcing speculation that the company was attempting to distance itself from past commentary or market positioning.

However, analysts later challenged that narrative. Some market observers noted that archived records indicate the account had rarely ever posted content since its creation.

“The account historically had almost no posting record.” — trading analysts cited in PANews reporting.

Archive tools such as the Wayback Machine reportedly show the account had long been inactive, suggesting the apparent deletion may have been a misunderstanding amplified by social media speculation.

Regulatory pressure extends beyond crypto markets

The firm is simultaneously battling regulatory action in India, where the Securities and Exchange Board of India (SEBI) accused several Jane Street entities of manipulating major equity derivatives indices.

A 105-page enforcement order alleged the firm executed a two-phase trading strategy that pushed markets upward before reversing positions to profit from declines. Regulators estimated gains of about $4.3 billion from the alleged activity.

SEBI temporarily barred the firm from Indian markets and froze hundreds of millions of dollars in suspected profits, though Jane Street has appealed the decision and rejected the allegations as biased.

“Jane Street will defend itself vigorously against these claims.” Company statement cited in regulatory reporting.

The convergence of regulatory scrutiny and crypto litigation has intensified debate about the growing role of quantitative trading firms across both traditional finance and digital asset markets.

What this means for crypto investors

Jane Street is not a crypto-native firm but one of the largest liquidity providers globally, reportedly handling a significant share of U.S. equity trading volume and participating in Bitcoin exchange-traded fund infrastructure.

That scale means institutional trading decisions can influence liquidity, volatility, and price discovery, factors retail investors often experience without visibility into underlying strategies.

Analysts say the outcome of the Terraform lawsuit could become a landmark test case defining how insider-trading standards apply to crypto markets.

For now, the allegations remain unproven, and courts will determine whether the claims hold merit.