Written by: 0xjs@Jinse Finance
Do you remember the event in May 2022 when the Luna/UST, valued at over $40 billion, collapsed within five days? (Refer to Jinse Finance's previous report "Review the moment of the LUNA brother collapse")
The collapse of Luna, along with the subsequent bankruptcy of Three Arrows Capital in Suzhou in the second half of 2022 and the bankruptcy of SBFFTX, directly triggered the crypto winter of 2022-2023.
The collapse of Luna can certainly be attributed to its mechanical design characteristics. However, the latest documents reveal that Wall Street high-frequency trading giant Jane Street is the major player hidden deep within this financial game, having obtained insider information from Terraform Labs, triggering the crisis of Luna, making enormous profits, and exiting intact.
Terraform Labs' liquidator sues Jane Street
On February 24, 2026, the liquidator of Terraform Labs filed a lawsuit against Jane Street, accusing it of insider trading.
The court appointed Terraform Labs' liquidator, Todd Snyder, co-head of Piper Sandler's restructuring group, who claimed in a redacted complaint submitted to the Manhattan federal court on Monday that Jane Street "used non-public information for front-running trading, accelerating Terraform's collapse." Snyder stated that the illegal use of this information allowed Jane Street to "precisely close out potential risk exposures worth hundreds of millions of dollars just hours before the collapse of the Terraform ecosystem."
The collapse of Terraform originated from its stablecoin TerraUSD (UST) losing its peg to the dollar, causing its sister token Luna to plummet as well. This event triggered a chain reaction in the cryptocurrency industry, ultimately leading Bitcoin's price to fall below $20,000. Terraform co-founder Do Kwon was recently sentenced to 15 years in prison for deceiving investors, falsely claiming that the stability of TerraUSD allowed it to be algorithmically "pegged" to the dollar. Kwon admitted to committing fraud and was sentenced to 15 years in December last year by a judge in New York, who described his crimes as "an unprecedented generational fraud."
Terraform filed for bankruptcy in January 2024 and established a liquidation trust later that year. Snyder was tasked with managing a trust fund aimed at maximizing recovery for Terraform investors and creditors and winding down its operations. In his work, Snyder deeply realized, "In one of the most impactful events in cryptocurrency history, Jane Street abused market relationships and manipulated the market for its own benefit."
Snyder stated: "We will pursue those who used their power to harm the interests of Terraform Labs creditors and profited from it on behalf of the victims, based on facts and law." He is now seeking compensation from Jane Street, its co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang.
Here are some details revealed in the lawsuit:
By the end of 2018, Jane Street had contracted to trade directly with Terraform.
However, it wasn't until February 2022 that Jane Street sent former Terraform intern Bryce Pratt to connect with his previous Terraform colleagues, thus starting trading Terraform tokens.
One of Pratt's ways of communicating with Terraform was through a group chat he established with his former colleagues, including a software engineer and Terraform’s head of business development. The group chat was named "Bryce’s Secret" and served as a channel to relay information related to Terraform back to Jane Street.
The lawsuit states that Pratt initiated a series of emails introducing Terraform's head of business development to Jane Street's head of "DeFi." Following that, the two sides began regular communications to discuss potential investment by Jane Street in Terraform. However, Jane Street turned these communications into a secret channel to obtain significant non-public information about Terraform and traded using this confidential information to maximize its profits.
Specifically, on May 7, 2022, at 5:44 PM (Eastern Time), Terraform withdrew $150 million worth of TerraUSD from Curve3pool (a liquidity pool allowing exchanges between stablecoins).
The complaint claims that less than 10 minutes after Terraform's withdrawal (which had not yet been announced to the market), some analysts believed that a crypto wallet associated with Jane Street withdrew 85 million TerraUSD from the same liquidity pool. This 85 million UST transaction was the largest single exchange in Curve 3pool's history, directly causing a severe sell-off of UST—which ultimately led to the collapse of the Terra ecosystem. In the following two days—May 8 and 9, 2022—the trading volume of UST nearly doubled, and its price fell sharply. By May 9, 2022, UST had decoupled to below $0.80.
As UST's price fell, Terraform attempted to stabilize the market and re-peg UST to $1. Just as UST experienced a brief decoupling in May 2021, Terraform covertly sought help from Jump Trading—while the market remained unaware.
On May 8, Do Kwon publicly stated that the $150 million withdrawal was to transfer TerraUSD to a new stablecoin liquidity pool. However, specific times related to activities involving the new liquidity pool, including any withdrawals from Curve3pool, were not disclosed.
These transactions increased sell-off pressure at critical moments, accelerating Terraform's collapse while allowing Jane Street to profit (or avoid significant losses).
However, the matter did not end there. The lawsuit claims that after the transactions on May 7, Jane Street continued to use confidential information (including information observed from Jump Trading) to trade TerraUSD for more profits.
On May 9, although TerraUSD had decoupled from Bitcoin, it had not completely collapsed. Pratt communicated in Jane Street's group chat with Kwon, Huang, and others, expressing the company's intention to purchase $200 million to $500 million worth of Bitcoin or Luna tokens at a significant discount. Kwon responded that Jump co-founder Bill DiSomma should proactively contact Jane Street to discuss financing matters for Terraform.
Another high-frequency giant, Jump Trading
Snyder's lawsuit against Jane Street is part of a broader effort by Terraform's liquidator to hold responsible those alleged to have participated in or profited from the situation.
In December 2025, Snyder also filed a separate $4 billion lawsuit against another major high-frequency trading "market maker," Jump Trading, accusing it of market manipulation, engaging in self-dealing, and accelerating Terra's collapse through similar alleged misconduct.
Jump obtained over 61 million Luna tokens at the price of $0.40 each when the market price of Luna was around $90. Jump later sold this batch of tokens for a profit of about $1.28 billion.
After Jane Street withdrew $85 million in liquidity, triggering the UST decoupling on May 7, Terraform immediately sought assistance from Jump Trading, just like when UST briefly decoupled in May 2021. The Luna Foundation Guard of the Terra Foundation transferred nearly 50,000 Bitcoin (about $1.5 billion) to Jump without a written agreement, intending to bring UST back to $1.
However, the ultimate whereabouts of these Bitcoins remain unconfirmed, as stated in the complaint against Jump Trading by Terraform's liquidator: "It remains unclear whether Jump further lined its own pockets with this."
Conclusion
High-frequency trading market makers have always been controversial in all trades.
For example, Jane Street, which is being sued in this article, has repeatedly sold BTC during U.S. stock market opening hours over the past two months: it is reported that Jane Street sold Bitcoin every morning at 10 AM (Eastern Time) around the end of 2025 and the beginning of 2026, coinciding with the U.S. stock market opening time.
On a certain day in December 2025, charts showed that the price of BTC fell from $89,700 to $87,700 within minutes of the U.S. stock market opening, and then rebounded for the rest of the day and during Asian market hours. The next day, upon the U.S. stock market opening, Jane Street sold off, and the cycle continued.
As a major authorized participant for Bitcoin ETFs (such as BlackRock's IBIT), Jane Street can participate in the creation and redemption of ETF shares. Opening sell-offs suppress prices, triggering liquidations and creating buying opportunities—Jane Street, leveraging its unique advantages, can fully exploit these cyclical fluctuations.
Critics believe that the sharp drop in Bitcoin prices at the opening of the U.S. stock markets constitutes market manipulation.
Some argue that market makers carry original sin:
The entire business model of high-frequency trading market makers is to repeatedly initiate momentum through high-frequency trading (leveraging with extremely high leverage on very small positions), creating false price directions to lure retail investors. Then they immediately reverse to reap all profits and ultimately cash out.
Others believe that market makers are just more mathematically adept:
Market makers do not destroy things; they only identify structural weaknesses and seize opportunities. If Terra could relieve its peg through strategic trading, that is merely a design flaw, not a crime. The real issue lies in the alleged insider information channels. Algorithmic stablecoins with weak pegs are like pressure tests that could erupt at any moment; Jane Street is just better at math than most people.
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