Terraform Labs Bankruptcy Trustee Sues Jane Street Over Alleged UST Frontrunning and Insider Access

Terraform Labs' court-appointed bankruptcy trustee filed a lawsuit on February 24 in the U.S. District Court for the Southern District of New York accusing Jane Street of frontrunning trades in TerraUSD (UST) and profiting from material, nonpublic information supplied by insiders during the Terra collapse, the WSJ reports. The complaint alleges Jane Street used a secret communication channel with Terraform Labs employees, facilitated by former intern Bryce Pratt, to obtain confidential information, and that after Terraform Labs withdrew 150 million UST from the Curve liquidity pool on May 7, 2022 without public disclosure, Jane Street-linked wallets withdrew about 85 million UST within minutes, allegedly reaping illegal gains and hastening the breakdown of the Terra ecosystem. A Jane Street spokesperson called the lawsuit an attempt to extract money and vowed to vigorously contest what it described as "baseless and opportunistic claims," while the firm also faces prior accusations from India of market manipulation that led to the freezing of roughly 4.843 billion rupees (about $565 million) in assets and a trading ban in Indian securities markets, alongside rumors that Chinese regulators are reviewing its ETF trading activity. BlockBeats reports crypto traders have linked the disappearance of Bitcoin's usual 10 a.m. Eastern sell-off and a subsequent 10% BTC price jump—adding about $120 billion to Bitcoin's market value and nearly $200 billion to the wider crypto market cap—to the lawsuit against Jane Street, as analysts revisit how spot Bitcoin ETF creation and redemption by authorized participants, often hedged with futures and derivatives under regulatory exemptions, can create timing gaps between ETF flows, spot market buying, and short-term price action, while also noting Jane Street's extensive crypto footprint across DeFi, infrastructure, mining equities, and its roles with Kraken and Coinbase.