Gate News message, April 23 — Jane Street has filed a motion with the U.S. District Court for the Southern District of New York seeking dismissal of a lawsuit filed by Terraform Labs, which accused the quantitative trading firm of precipitating the collapse of the UST/LUNA algorithmic stablecoin ecosystem.
Jane Street and individual defendants argued that the lawsuit represents a meritless attempt by Terraform’s bankruptcy estate to shift blame for the multi-billion-dollar collapse, stating: “This case is an attempt by the estate of Terraform Labs to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.” The defendants requested dismissal with prejudice, preventing Terraform from refiling the same claims. They noted that Terraform founder Do Kwon pled guilty to conspiracy and wire fraud charges in December 2024 and is currently serving a 15-year prison sentence, while a jury found Terraform and Kwon civilly liable for securities fraud.
Regarding insider trading allegations, Jane Street argued that Terraform’s claims are self-defeating, as the firm’s largest trades occurred after material information about UST/LUNA’s health became public. Jane Street began acquiring a short position on May 8 and sold assets on May 7, but noted that Terraform failed to identify any non-public information or point to specific back-channel communications that would have provided an edge.
Jane Street cited the “Wagoner rule,” which prevents bankruptcy estates from suing third parties to recover losses caused by their own fraud, and argued that the claims are impermissibly extraterritorial since Terraform failed to prove the trades took place in the U.S.
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