Jane Street asks court to dismiss Terraform insider trading suit

Jane Street filed a motion to dismiss in Manhattan federal court on Thursday, asking the judge to throw out the insider trading lawsuit brought by the court-appointed administrator of bankrupt Terraform Labs. The trading firm asked for dismissal with prejudice.

Todd Snyder, Terraform’s court-appointed administrator, sued Jane Street in February. The complaint names Jane Street, co-founder Robert Granieri and employees Bryce Pratt and Michael Huang, and alleges they traded Terra-linked tokens after receiving nonpublic information from Terraform insiders. Snyder’s complaint contends those trades worsened the collapse of the Terra ecosystem.

The collapse began in May 2022 when algorithmic stablecoin TerraUSD lost its peg to the U.S. dollar and the related LUNA token plunged, erasing about $40 billion in market value. Snyder seeks damages and alleges the defendants used inside information to accelerate the decline.

In its motion, Jane Street argued it acted on visible market signals and price action, not on confidential disclosures. The filing calls the lawsuit “an attempt to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.” The motion added that “Terraform now claims it was victimized by Jane Street’s trading,” and noted the underlying fraud involving Terraform has already been prosecuted and punished.

Jane Street said investors saw public signs of the collapse and that the firm moved to sell a deteriorating investment as the market fell. The motion highlights timing it says undercuts Snyder’s theory: Jane Street’s largest sale of TerraUSD occurred about 10 minutes after the information the complaint labels material and nonpublic was already visible to market participants.

The filing also argued the complaint fails to identify any particular material nonpublic information provided to Jane Street. The motion criticized an allegation that Jane Street learned the timing of Terraform’s transition to a new liquidity pool through “back-channel communications,” noting the complaint does not point to any such communication despite pre-suit discovery.

Jane Street pointed to criminal proceedings against Terraform founder Do Kwon, who pleaded guilty to conspiracy and wire fraud and was sentenced to 15 years in prison, saying those matters address the fraud at the center of the collapse.

The Manhattan federal court will now consider the motion as the parties brief the legal issues. If the judge grants dismissal with prejudice, Snyder would be barred from bringing the same insider trading claims against Jane Street and the named individuals.