Author: CoinDesk

Translation: Deep Tide TechFlow

Deep Tide Introduction: Wall Street's top trading company Jane Street has been accused of obtaining insider information through private Telegram chats with Terraform Labs' insiders, accurately escaping the peak and shorting to profit $134 million before the Terra crash. This lawsuit not only reveals the information advantage of traditional financial giants in the crypto market but also, due to the 2023 court ruling classifying UST and Luna as securities, has a stronger legal foundation, providing significant reference value for investors to understand institutional behavior and market manipulation.

One of Wall Street's largest trading companies, Jane Street Group, is accused of selling $192 million worth of TerraUSD (UST) stablecoins through a private Telegram channel with insiders from Terraform Labs just before the Terra crash in May 2022, according to the latest unsealed court documents from the Manhattan federal court.

The lawsuit was filed by the liquidators of the bankrupt Terraform assets and has been revised to reduce redactions, disclosing new details on how Jane Street obtained non-public information during the collapse of the Terra ecosystem.

Jane Street denied the initial allegations filed in February, calling them "desperate" and "without basis," and called for the court to dismiss the case.

According to the lawsuit, Jane Street's information advantage allegedly came from a private Telegram backchannel between former Terraform intern Bryce Pratt (who was working at Jane Street at the time) and his former colleagues at Terraform.

The bankruptcy administrator stated that this contact helped Jane Street sell its UST position at nearly par before the algorithmic stablecoin's collapse, then establish a short position, profiting about $134 million when Terra's $40 billion ecosystem collapsed.

In an internal communication cited in the lawsuit, Pratt allegedly joked that his colleagues should feel "slightly happy" about having an "information advantage."

With this advantage, Jane Street allegedly sold all of its UST position on May 7, 2022, clearing out about 193 million tokens. Its largest trade was the sale of $85 million UST on the decentralized exchange Curve Finance, which occurred just nine minutes after Terraform discreetly withdrew $150 million UST liquidity from the same liquidity pool.

This trade is significant because the public post-crash analysis of the Terra collapse has long focused on a large exchange on Curve that helped push the token away from its $1 peg. The lawsuit now claims that the wallet belongs to Jane Street.

When a crypto analytics company later informed a Jane Street contact that the company "made a lot of money," internal communications cited in the case show traders were concerned about how their wallets would be identified and then discussed how to "disable" them.

"This lawsuit is a transparent attempt to extract money in a situation where it is well known that Terra and Luna holders suffered losses due to the billions of dollars in fraud perpetrated by Terraform Labs' management," a Jane Street spokesperson stated. "As evidenced by our dismissal motion submitted to the court last month, we will vigorously defend ourselves against these baseless opportunistic claims."

The lawsuit also names Jane Street co-founder Robert Granieri and trader Michael Huang. It alleges violations of federal securities law and the Commodity Exchange Act, seeking to recover profits to repay creditors.

A 2023 federal court ruling in another case involving the U.S. Securities and Exchange Commission found that UST and Luna qualify as securities, enhancing the legal foundation of the new lawsuit.

The lawsuit claims that on May 18, 2022, just five days after UST hit bottom, Jane Street offered a job to Terraform's research director, who started two weeks later.