Jane Street Accused of Triggering the $40 Billion Terra-Luna Crash

The ghost of Terra-Luna has resurfaced. The bankruptcy administrator for Terraform Labs has just filed an explosive lawsuit against Jane Street, one of Wall Street’s largest market makers. The accusation: using insider information to abandon ship before everything collapsed in May 2022.

The 10-Minute Window That Changed Everything

The case hinges on a disturbing sequence. On May 7, 2022, Terraform Labs quietly withdrew 150 million UST (TerraUSD) from the Curve3pool to transfer to another pool. This withdrawal was not publicly announced.

Nine minutes later, a wallet linked to Jane Street executed an 85 million UST swap on the same pool—the largest single transaction ever recorded on that platform.

According to the complaint filed on February 23, 2026, in Manhattan federal court, this transaction “would have been impossible without inside information.” The combined withdrawals destabilized the pool’s liquidity, triggering the panic that caused the UST stablecoin to lose its peg and brought down the entire Terra ecosystem.

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“Bryce’s Secret”: The Insider Information Channel

The complaint details how Jane Street allegedly obtained this information. Bryce Pratt, a former intern at Terraform Labs during summer 2021, joined Jane Street in September of that year. By February 2022, he had created a private chat group called “Bryce’s Secret” with former Terraform colleagues.

In one exchange cited in the filing, a Terraform engineer wrote: “bro we all know who the buyer is. its where u work… Jane Streeeeeeeet.” When asked about the legality of these exchanges, Pratt allegedly responded: “everything. Probably ya. If Jump can legally do smtg we probs can too.”

The complaint also names Robert Granieri, Jane Street’s co-founder, and Michael Huang, another employee, as defendants.

$200 Million in Losses Avoided

According to Forbes, Jane Street allegedly avoided over $200 million in losses thanks to this information. The firm, which manages over $650 billion in assets and accounts for roughly 10% of U.S. equity trading volume, categorically rejects these accusations.

A spokesperson called the lawsuit “desperate” and “a transparent attempt to extract money,” noting that Terra and Luna holders’ losses resulted from “the multibillion-dollar fraud perpetrated by Terraform Labs management.”

Do Kwon Already Convicted, But That Doesn’t Exonerate Jane Street

Jane Street’s argument—it’s all Do Kwon’s fault—doesn’t necessarily erase its own responsibility. The Terraform founder pleaded guilty and was sentenced to 15 years in prison in December 2025. Terraform Labs agreed to pay $4.47 billion in penalties.

But as several legal analysts note: both things can be true simultaneously. Terra was a fraud, and some players may have profited from insider information to exit before everyone else.

Jump Trading Also in the Crosshairs

Jane Street isn’t the only market maker in trouble. In December 2025, the same administrator sued Jump Trading and its executives for $4 billion, accusing them of “actively exploiting” the Terra ecosystem through a secret deal allowing them to buy LUNA at $0.40 when the market price was $110.

These lawsuits are part of Todd Snyder’s broader efforts—the bankruptcy court-appointed administrator—to recover assets for Terraform creditors and victims.

Jane Street Also Under Fire in India

This case comes as Jane Street already faces a ban in India. In July 2025, Indian regulator SEBI published a 105-page order documenting what it describes as a manipulation strategy on the BANKNIFTY and NIFTY 50 indices.

According to SEBI, Jane Street entities allegedly generated the equivalent of $4.3 billion in profits through a tactic dubbed “expiry day trap”: aggressively buying stocks in the morning to push the index higher, then selling in the afternoon to profit from short options positions. The regulator seized approximately $566 million in allegedly illegal gains.

Implications for the Crypto Market

Beyond the Terra case, these accusations raise questions about the role of large market makers in the crypto ecosystem. Jane Street is one of four authorized participants for BlackRock’s Bitcoin ETF (IBIT). Its latest 13F filing shows approximately $790 million in IBIT shares.

Current disclosure rules don’t require reporting positions in futures, swaps, or over-the-counter derivatives. Jane Street’s actual net exposure to Bitcoin—long, neutral, or short—remains unknown.

For retail investors, this case serves as an uncomfortable reminder: in times of crisis, some players have information and access that the public does not.