Jane Street Sued Over $192M UST Sale Hours Before Terra Depeg

Quantitative trading firm Jane Street has been sued by the Terraform Labs bankruptcy trustee over the sale of roughly 193 million UST tokens in the hours before the algorithmic stablecoin lost its dollar peg in May 2022. The complaint was filed in Manhattan federal court.

Per the filing, Jane Street disposed of approximately $192 million of UST on May 7, 2022. The trustee alleges the firm then booked a profit of about $134 million on a short position taken after the sale.

The lawsuit centers on a private Telegram chatroom referenced in the complaint as "Bryce's Secret." According to the filing, Bryce Pratt, a Jane Street employee and former Terraform Labs intern, relayed non-public information about the project's internal condition to the firm.

The trustee said Jane Street sold $85 million of UST nine minutes after Terraform Labs withdrew $150 million in liquidity from a Curve Finance pool. The complaint frames that withdrawal as a signal of internal distress.

Jane Street rejected the allegations. In a statement, the firm said the losses suffered by Terra and LUNA holders were the product of a multi-billion-dollar fraud carried out by Terraform Labs' management. The firm said it would "vigorously defend" itself and called the claims baseless.

The complaint estimates the Terra collapse erased roughly $40 billion in market value across the LUNA and UST ecosystem. UST was an algorithmic stablecoin pegged to the dollar through a mint-and-burn mechanism with LUNA, and the failure of that mechanism in May 2022 triggered one of the largest single drawdowns recorded in digital assets.

The case proceeds in the Southern District of New York. The trustee is seeking recovery on behalf of the Terraform Labs estate. A schedule for Jane Street's response has not yet been set, per court records cited in coverage of the filing.

What it means: the suit puts a major Wall Street market maker squarely inside a U.S. courtroom on an insider-trading theory tied to a stablecoin, an unusual posture for digital assets. The outcome will test how traditional information-asymmetry rules apply to DeFi communications and could shape how trading desks document their crypto information flow going forward.