Newly unsealed court filings allege that Wall Street trading giant Jane Street Group leveraged a private Telegram backchannel to gain insider information, enabling it to profit from the $40 billion collapse of the Terra ecosystem in May 2022. The lawsuit, filed by Terraform Labs' bankruptcy estate, claims the firm netted approximately $134 million in unlawful profits.
"This suit is a transparent attempt to extract money when it is well-established that the losses suffered by Terra and Luna holders were the result of a multi-billion dollar fraud perpetrated by the management of Terraform Labs," a Jane Street spokesperson said in a statement, calling the claims "baseless" and "opportunistic."
The complaint, filed in Manhattan federal court, details how Jane Street allegedly used its informational edge to liquidate its entire $192 million position in TerraUSD (UST) on May 7, 2022, just before the algorithmic stablecoin lost its $1 peg. Central to the allegations is a Telegram group dubbed “Bryce’s Secret,” named for Bryce Pratt, a former Terraform intern then employed by Jane Street. The lawsuit alleges Pratt relayed non-public details from his former colleagues, prompting one internal communication where Pratt allegedly joked about having an “informational advantage.”
This lawsuit potentially sheds light on a pivotal moment in the stablecoin’s collapse. Post-mortems have long focused on a large swap on the decentralized exchange Curve Finance that destabilized UST. The lawsuit alleges an $85 million UST sale, executed by Jane Street just nine minutes after Terraform itself withdrew $150 million of liquidity from the same pool, was the trade that broke the peg. The legal action is bolstered by a 2023 federal court ruling in a separate Securities and Exchange Commission case that found UST and its sister token Luna qualify as securities.
The Alleged Playbook
According to the filings, after exiting its UST position near par, Jane Street quickly built short positions against Terra ecosystem tokens, generating the $134 million in profit as the tokens spiraled to zero. The suit names Jane Street co-founder Robert Granieri and trader Michael Huang as defendants alongside the firm and Pratt.
Internal communications cited in the complaint show traders discussing how to “decommission” their crypto wallets after an analytics firm contacted them, saying they had “made a killing.” The lawsuit also notes that five days after UST bottomed out, Jane Street offered a job to Terraform's head of research, who joined the firm two weeks later.
Jane Street has filed a motion to dismiss the case, maintaining that its trading decisions were based on publicly available information and that Terraform's estate is attempting to deflect blame for its own fraudulent management.
This article is for informational purposes only and does not constitute investment advice.
