Terraform Labs filed an amended complaint accusing Jane Street of obtaining non-public information through a private Telegram group to liquidate its entire $193 million UST position on May 7, 2022, hours before the stablecoin depegged and triggered Terra’s collapse. The lawsuit alleges the Wall Street trading firm coordinated the exit with knowledge of upcoming damaging information, profiting $134 million from concurrent shorts on UST and LUNA while the ecosystem unraveled.
How the Alleged Information Flow Worked
According to the amended complaint, a private Telegram group called “Bryce’s Secret” was created on February 22, 2022, serving as a channel for Jane Street traders to extract confidential information from Terraform Labs insiders. Bryce Pratt, a Jane Street trader and former Terraform intern, allegedly used the group to request “defi info” from Terraform contacts, while co-founder Robert Granieri and trader Michael Huang monitored the discussions. Todd Snyder, a Terraform administrator, claims the group enabled Jane Street to obtain non-public details about UST’s stability and Terraform’s operational vulnerabilities before they reached the market.
The Liquidation and Its Timing
On May 7, 2022, Jane Street liquidated its entire UST position in a single trading day. Hours after the sale completed, UST depegged from its $1 peg and entered a death spiral that destroyed the Terra ecosystem. Terraform’s legal team argues this timing was not coincidental: Jane Street possessed advance warning of the depeg and timed its exit to avoid losses while shorting both UST and LUNA. The firm allegedly captured $134 million in profits from the coordinated trade and subsequent price collapse. Jane Street filed a motion to dismiss in April 2023, claiming Terraform perpetrated its own fraud and that any trading occurred after damaging information became public.
Causation Dispute at Core of Defense
Jane Street’s core argument hinges on causation. The firm contends that Terraform management caused the collapse through mismanagement and fraud, not Jane Street’s exit. The motion to dismiss stated that Terraform seeks to “extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.” This framing shifts the narrative from alleged insider trading to alleged victim-blaming by a failed project. The court has not yet ruled on the motion, and no verdict date has been announced. The dispute ultimately turns on whether Jane Street acted on material non-public information or simply reacted to public signals of systemic risk.
What Comes Next
The amended complaint represents Terraform’s attempt to overcome Jane Street’s dismissal motion with additional factual allegations. No ruling has been issued, and discovery has not formally begun. The case will determine whether informal Telegram channels constitute actionable insider trading schemes in crypto markets and whether trading on advanced knowledge of an ecosystem’s collapse constitutes market manipulation under securities law.
