JANE STREET WAS BEHIND THE $40 BILLION LUNA UST COLLAPSE ACCORDING TO THE NEW LAWSUIT.

A lawsuit filed in U.S. District Court claims Jane Street used insider information during the May 2022 Terra collapse to profit and cause further damage to the system.

In mid-April 2022, Terraform announced that Anchor’s 20% yield would start declining. Anchor was the main reason users held UST. Once that yield started falling, demand for UST weakened.

At the same time, Terraform was moving UST liquidity to a new Curve pool. When liquidity is reduced, large sell orders have a much bigger impact on price.

On May 8, 2022, Terraform withdrew 150 million UST from Curve’s main 3pool.

And exactly 9 minutes later, Jane Street sold 85 million UST in a single trade in that same pool, the largest ever.

The lawsuit says this trade triggered a massive crash and within a few days UST literally went to zero.

Lawsuit also states that Jane Street was in direct contact with Do Kwon during this crisis and discussed buying BTC or LUNA at heavy discounts, possibly $200M-$500M.

BTC is relevant because Terraform was using Bitcoin reserves to defend UST’s peg. As UST broke, those reserves had to be deployed. Access to insider information about those conditions would have been extremely valuable.

If these allegations are true, the sequence is very clear:

First, insider knowledge about reduced liquidity in the Curve pool.

Second, a large 85 million UST sale into that thinner liquidity, which would naturally push price down faster and deepen the crash.

Third, as UST rapidly lost its peg and Terraform entered full crisis mode, the company was forced to deploy its Bitcoin reserves to try and stabilize the system. At that same moment, Jane Street was in discussions to step in and buy BTC or LUNA at heavy discounts, potentially $200M- $500M worth.

Who would have thought that the same entity responsible for the daily ‘10 AM manipulation’ orchestrated the 2022 crypto bear market?