Author: Max.s

The cryptocurrency market at the end of February 2026 is shrouded in a strange "coincidence." Over the past few months, the Bitcoin market has often faced a wave of precise selling at 10 AM Eastern Time, which the market has dubbed the "Jane Street 10 AM Dumping Strategy." However, just this week, as a lawsuit was filed in the New York Federal Court, this mechanically precise selling pressure suddenly disappeared, causing Bitcoin and a host of altcoins to soar.

This is not an urban legend but a real whirlwind that Wall Street's top quantitative giant Jane Street is currently facing. As one of the world's most secretive and profitable trading institutions, Jane Street not only faces astronomical fines for manipulation in the Indian derivatives market last year, but is now also embroiled in the old accounts related to the 2022 collapse of TerraUSD (UST). The bankruptcy liquidator of Terraform Labs, Todd Snyder, has formally filed a lawsuit against it, accusing it of utilizing insider information to front-run trades, accelerating the destruction of what was once a $40 billion cryptocurrency empire.

As "delayed justice" accurately strikes through a four-year cycle, and as traditional financial quantitative giants leave indelible on-chain evidence in the decentralized world, we have to re-examine a core issue: Is the "black box operation" that centralized giants like Jane Street rely on an engine of market liquidity or a deadly amplifier of systemic risk?

To understand the impact of this lawsuit, we need to turn the clock back to May 7, 2022 — the node that triggered a seismic event in the cryptocurrency industry.

In the mechanism design of the algorithmic stablecoin UST, the Curve liquidity pool (especially the Curve 3pool) is the core liquidity reservoir that maintains its peg to the US dollar. According to court documents disclosed by the bankruptcy liquidator, on that day, Terraform Labs quietly withdrew 150 million UST from the Curve liquidity pool without making any public announcements. For an algorithmic stablecoin that relies heavily on confidence and liquidity depth, such a large-scale withdrawal is undoubtedly extremely dangerous.

Shockingly, just 10 minutes later, a wallet address linked to Jane Street was accused of urgently withdrawing 85 million UST from the same liquidity pool. Under the AMM (automated market maker) mechanism, extreme skewing of assets within the pool can lead to exponential slippage. Jane Street's withdrawal of 85 million UST was like detonating a directional bomb on a dam that had already shown cracks, directly causing the depletion of UST liquidity and igniting the subsequent "death spiral."

This crucial 10-minute time difference became solid evidence for the liquidator's accusation of "insider trading." The lawsuit revealed a behind-the-scenes network named "Bryce’s Secret." Jane Street was accused of deliberately appointing former Terraform Labs intern Bryce Pratt to leverage his private connections to re-establish contact with Terraform’s software engineers and business development executives. This private chat group, formed by former colleagues, essentially became a "backdoor" for transmitting major internal secrets of Terraform to Wall Street giants.

Moreover, the liquidator had previously laid the groundwork for a $4 billion claim against another quantitative giant, Jump Trading, indicating that some non-public information about Terraform Labs was leaked to Jane Street through Jump Trading. The dark web communication between top Wall Street market makers during a crisis left retail investors completely exposed to an environment of extreme information asymmetry.

Although Jane Street's spokesperson strongly denied the accusations, calling it a "desperate and transparent extortion" and blaming the losses on Do Kwon and the Terraform management for a massive fraud amounting to billions, in the face of the immutable timestamps on the blockchain and the retrieved chat records, the quantitative giant's past "dimensional shock" is facing unprecedented legal backlash.

The Jane Street case has sparked a deeper reflection within the industry: Is the black box operation of centralized giants exacerbating the systemic risks of crypto assets?

In traditional financial markets, Jane Street is known for its extreme low profile and astounding profitability. They rely on complex mathematical models, high-frequency trading (HFT), and ultra-low latency hardware to extract profits from tiny price differences. When such institutions began aggressively entering the crypto market around 2020, the industry naively believed that they would bring much-needed liquidity and pricing efficiency.

However, it turns out that the profit-seeking nature of capital can more easily morph into predatory trading in the unregulated world of cryptocurrency. The depth of the crypto market is still orders of magnitude lower compared to U.S. stock markets. When funds of Jane Street’s caliber and its algorithmic trading engine intervene, they not only accept prices but also create them.

Take, for example, the "10 AM dumping strategy" that has been widely discussed in the market recently. Due to the operational mechanism of spot Bitcoin ETFs (like BlackRock's IBIT), market makers need to conduct purchases and redemptions to align with asset net values (NAV) at specific times.

Some analysts point out that by leveraging a large underlying position and algorithms, giants can apply selling pressure during relatively weak liquidity periods, artificially creating panic sell-offs, triggering the liquidation of retail long leveraged positions, and subsequently accumulating at lower levels. Such strategies are often under severe scrutiny from the U.S. SEC in traditional markets but remain ambiguously defined in the crypto spot market.

In the Terra incident, the power of this "black box algorithm + information asymmetry" was vividly illustrated. When the system is in a steady state, market makers do indeed provide liquidity; but when the system experiences tail risks (such as a slight de-pegging of UST), these giants' algorithms can instantly flip. With insider information or millisecond anticipation of on-chain data, they not only fail to provide buffers but instead become the foremost short-sellers or capital withdrawers. This "borrowing an umbrella on a sunny day and pulling away the ladder on a rainy day" behavior can quickly amplify local liquidity crises into a full-scale systemic collapse through their massive fund sizes.

If we widen our view, we find that Jane Street's operating style in the crypto market is not an isolated instance, but rather an extension of its inherent trading logic.

In July 2025, the Indian Securities and Exchange Board (SEBI) imposed a record fine of 48.44 billion rupees (approximately $580 million) on Jane Street, along with a trading ban. SEBI's investigation revealed that on 18 options expiration days (including Bank Nifty and Nifty 50), Jane Street was suspected of conducting "short, massive, and highly aggressive" intervention trades in the spot, futures, and options markets. They manipulated index levels at critical nodes on expiration days, thus enabling significant profits on their options positions.

Whether in India's traditional derivatives market or in the on-chain liquidity pools of Terra, we see the same behavioral logic: searching for vulnerabilities in market structures (liquidity vacuums on options expiration days, imbalances in algorithmic stablecoin liquidity pools), and then leveraging massive funds and millisecond execution speeds for "highly aggressive" interventions.

The difference is that traditional financial markets have mature regulatory bodies (like SEBI) for post-event penetration review; while in the crypto market of 2022, giants mistakenly believed that the decentralized disguise could cover everything.

Now it is 2026, nearly four years since the collapse of Terra, and Do Kwon was sentenced to 15 years in prison at the end of last year. Why, more than three years later, is the liquidation targeting market makers only just reaching a climax?

This reflects a new characteristic of the cryptocurrency industry as it enters deeper waters: Cross-Cycle Accountability. In the past, the rapid turnover of crypto cycles led many malefactors to believe that as long as they weathered the bear market, old debts would be covered by the prosperity of a new bull market. However, the ongoing pursuit by the Terra bankruptcy management team indicates that the dual blades combining traditional bankruptcy liquidation procedures (subpoena rights, retrieval of communication records) with the transparency of blockchain data (on-chain tracking) are thoroughly destroying this sense of luck.

Jane Street's involvement in Terra's old accounts is not merely a legal battle concerning billions of dollars in compensation, but also a significant footnote in the history of crypto finance. It tears away the elegant and mysterious veil that Wall Street's quantitative giants had in the decentralized world, exposing their essence of converting computational power and funding advantages into brutal predatory tools in the absence of regulatory constraints.

This "witch hunt" in the core area of cryptocurrency is by no means excessive regulation; rather, it is a necessary growing pain as the crypto market matures. It brutally announces to all institutional participants: while blockchain may have no borders, every timestamp on the chain will be an indelible piece of evidence in the courtroom.

For market makers, the blind sprinting wild age has completely ended; in future market games, compliance is no longer an optional moat but the final bottom line crucial to survival.

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