Written by: Max.S

At the end of February 2026, the cryptocurrency market was shrouded in a bizarre "coincidence." Over the past few months, the Bitcoin market often faced a wave of precise sell-offs at 10 AM Eastern Time, which the market dubbed the "Jane Street 10 AM Crash Strategy." However, just this week, with the filing of a lawsuit in the New York federal court, this mechanically precise selling pressure suddenly disappeared, causing Bitcoin and a host of altcoins to surge in response.

This is not an urban legend, but a real whirlwind currently facing Wall Street's quantitative giant Jane Street. As one of the world's most secretive and profitable trading firms, Jane Street is not only wrestling with hefty fines from last year's manipulation charges in the Indian derivatives market, but is now also embroiled in the fallout from the 2022 collapse of TerraUSD (UST). The bankruptcy liquidator of Terraform Labs, Todd Snyder, has formally sued them, accusing Jane Street of using insider information to conduct front-running trades that accelerated the demise of a crypto empire once valued at $40 billion.

As "delayed justice" targets its precise blow four years later, and as the giant of traditional finance leaves indelible on-chain evidence in the decentralized world, we must revisit a core question: Is the "black box operation" that centralized giants like Jane Street rely on the engine of market liquidity, or a deadly amplifier of systemic risk?

To understand the lethal force of this lawsuit, we need to rewind the clock to May 7, 2022 -- a pivotal moment that triggered a major earthquake in the crypto 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 discreetly 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 alleged to be affiliated with Jane Street urgently withdrew 85 million UST from the same liquidity pool. Under the AMM (Automated Market Maker) mechanism, the extreme skew of assets within the pool can trigger exponential slippage. Jane Street's withdrawal of 85 million UST was like detonating a directional bomb on an already cracked dam, directly leading to the depletion of UST liquidity and initiating the subsequent "death spiral."

This critical 10-minute time gap became the ironclad evidence for the liquidator's accusations of "insider trading." The lawsuit revealed a behind-the-scenes network called "Bryce's Secret." Jane Street is accused of deliberately appointing former Terraform Labs intern Bryce Pratt to reconnect with Terraform's software engineers and business development heads using personal connections. This private chat group composed of former colleagues effectively became a "backdoor" for delivering significant internal secrets of Terraform to Wall Street's giants.

Not only that, the liquidator had previously laid the groundwork in a lawsuit against another quantitative giant, Jump Trading, for up to $4 billion, and the latest lawsuit further indicates 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 has left retail investors thoroughly exposed to a meat grinder of extreme information asymmetry.

Although a Jane Street spokesperson strongly denied the accusations, calling it a "desperate and transparent extortion," and blaming the losses on Do Kwon and Terraform's management team for a multibillion-dollar fraud, the immutable on-chain timestamps and recovered chat logs put the quantitative giant's past "dimensional reduction strikes" facing unprecedented legal backlash.

The case against Jane Street prompts a deeper industry reflection: Is the black box operation of centralized giants exacerbating the systemic risk of crypto assets?

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

However, it turned out that the profit-seeking nature of capital is more easily perverted into predatory trading in the poorly regulated crypto world. The depth of the crypto market still lags several orders of magnitude compared to the US stock market. When capital sizes at the level of Jane Street paired with its algorithmic trading engine intervene, they are not only price takers, but also price creators.

Take the recently widely discussed "10 AM Crash Strategy" as an example. Due to the operational mechanisms of spot Bitcoin ETFs (like BlackRock's IBIT), market makers need to conduct the purchase and redemption in alignment with the net asset value (NAV) at specific times.

Analysis indicates that leveraging a massive base and algorithms, giants can artificially create panic and trigger the liquidation of retail bullish leveraged positions by imposing selling pressure during periods of relative weak liquidity, subsequently acquiring assets at lower prices. Such strategies often face severe scrutiny from the SEC in traditional markets, but in the crypto spot market, the boundaries remain murky.

In the Terra incident, the power of such an "algorithm + information asymmetry" black box was fully displayed. When the system is in a stable state, market makers indeed provide liquidity; but when the system encounters tail risks (such as UST slightly de-pegging), these giants' algorithms instantly turn against them. Armed with inside information or millisecond-level anticipatory insight into on-chain data, they not only fail to provide a buffer but become the first short-sellers or capital withdrawers. This "borrowing an umbrella on sunny days and pulling away the ladder on rainy days" behavior, through their massive capital base, quickly amplifies localized liquidity crises into systemic collapses.

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

In July 2025, the Securities and Exchange Board of India (SEBI) imposed a staggering fine of 48.44 billion rupees (approximately $580 million) on Jane Street, along with a trading ban. SEBI's investigation showed that, over 18 option expiration days (including Bank Nifty and Nifty 50), Jane Street was suspected of conducting "short-lived, massive, and highly aggressive" intervention trades in the spot, futures, and options markets. They manipulated index levels at key nodes on expiration days utilizing capital advantages, resulting in enormous profits for 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: identifying the weaknesses in market structure (liquidity vacuum on options expiration days, imbalance in algorithmic stablecoin pools), and then leveraging massive funds and millisecond execution speeds for "highly aggressive" interventions.

The difference lies in the fact that the traditional financial market has mature regulatory bodies (like SEBI) for post-hoc thorough reviews; in the crypto market in 2022, giants mistakenly believed that the decentralized façade could shield 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, after more than three years, has the scrutiny of market makers just peaked?

This reflects a new characteristic of the crypto industry entering deep waters: Cross-Cycle Accountability. In the past, the rapid iteration of crypto cycles led many wrongdoers to believe that they could cover old debts with the prosperity of a new bull market as long as they weathered the bear market. However, the ongoing pursuit by the Terra bankruptcy management team indicates that the dual-edged sword of traditional bankruptcy procedures (subpoena powers and communication record retrieval) combined with blockchain data transparency (on-chain tracking) is thoroughly destroying this misplaced sense of security.

The involvement of Jane Street in Terra's old accounts is not just a legal game concerning billions of dollars in compensation, but also a landmark footnote in the history of crypto finance. It tears apart the elegant and mysterious facade of Wall Street's quantitative giants in the decentralized world, exposing their essence of turning computational power and capital advantages into brutal predatory tools in the absence of regulatory restraints.

This "witch hunt" action in the core zone of crypto is not excessive regulation, but an inevitable growing pain towards the maturity of the crypto market. It cruelly declares to all institutional participants: Blockchain may have no borders, but every timestamp on the chain will serve as an indelible piece of evidence in court.

For market makers, the era of blind reckless running has completely ended; in the future market games, compliance is no longer an optional moat, but the last line of life or death.

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