Key Takeaways:
- The administrator of Terraform Labs has filed accusations that Jane Street employed “insider information” from Terraform staff in order to dump UST ahead of the depeg, which would happen in 2022.
- A private Telegram group named “Bryce’s Secret” provided this group of traders with privileged information regarding Terraform’s liquidity, strategies and finances, according to court documents.
- The lawsuit requests damages and profits be disgorged for insider trading, fraud, and market manipulation in connection with the collapse of the Terra ecosystem.
The allegations have provoked a new round of questioning into one of crypto’s greatest failures. A new lawsuit filed in the U.S. District Court for the Southern District of New York alleges that quantitative trading giant Jane Street used internally leaked information about Terraform Labs to get off its huge holdings of UST’s stablecoin before the cryptocurrency lost its dollar peg.
The lawsuit has been brought by the court-appointed administrator for the company’s bankrupt estate, Todd Snyder, and their plan to recover funds from the creditors.
Court Filing Details Alleged Insider Information Network
According to the complaint, Jane Street employees allegedly maintained direct communication channels with current and former Terraform personnel through a private Telegram group known internally as “Bryce’s Secret.”
The chat was said to be named after Terraform intern Bryce Pratt, who went on to become a systems developer for Jane Street. This filing names Terraform staff with whom Pratt had contact and aid in passing along confidential information to other staff members at the trading firm.
According to plaintiffs, Jane Street had official, non-public information about Terraform’s operations, their need for funds, and “investment discussions”, along with information regarding their efforts to create decentralized finance applications and financial vulnerabilities.
The complaint claims the info gave Jane Street a huge trading benefit that was not present within the huge marketplace.
Read More: U.S. Demands 12-Year Prison Term for Do Kwon After $40B Terra Crash Shook Crypto Markets
Jane Street Accused of Selling UST Before Depeg
The main charge is about these trades on May 7, 2022, which were made near the time of TerraUSD (UST) dropping off the U.S. Dollar peg.
Traders Allegedly Unwound Exposure Ahead of Market Panic
According to the filing, Jane Street allegedly liquidated its entire UST position at a critical moment after obtaining confidential information about Terraform’s financial condition and liquidity challenges.
The lawsuit claims the firm avoided substantial losses by exiting before the market collapse accelerated. Plaintiffs further allege that Jane Street subsequently established short positions in UST and LUNA, allowing the firm to profit as the ecosystem entered a downward spiral.
Terraform’s representatives describe the trades as impossible to execute with such precision without access to privileged information. The complaint alleges the firm generated extraordinary profits while thousands of retail investors suffered severe losses during the crash.
Read More: California Court Clears $1B NVIDIA Crypto Revenue Lawsuit
Allegations Extend Beyond Trading Activity
The filing also alleges that Jane Street was trying to bury the evidence due to the spotlight it has been under since the fall of Terra.
The suit lists another co-founder of Jane Street Group, a man named Robert Granieri, and his partner, another so-called founder, Bryce Pratt, as well as Michael Huang, a trader, as defendants. It’s in pursuit of restitution of alleged wrongful gains and compensation to Terraform Labs, Luna Foundation Guard (LFG) and claims assignees who invested in Terraform Labs.
A key legal challenge to come out of the collapse of Terra has been this case, which saw about $40 billion of market value vanish in what has been one of the biggest crypto crashes in history.
