Trading firm Jane Street has asked a US court to toss a lawsuit brought by the administrator of the bankrupt Terraform Labs, accusing the company of insider trading that worsened the collapse of the Terra ecosystem.
In a motion to dismiss filed in a Manhattan federal court on Thursday, Jane Street argued Terraform’s suit was an attempt “to extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated on the market.”
“Terraform now claims it was victimized by Jane Street’s trading,” it added. “The problem with this theory is that Terraform’s fraud scheme — in which Jane Street had no involvement — has already been prosecuted, adjudicated, and punished.”
Terraform’s court-appointed administrator, Todd Snyder, sued Jane Street, co-founder Robert Granieri, and employees Bryce Pratt and Michael Huang in February, accusing them of trading Terra tokens after receiving nonpublic information from “Terraform insiders.”
A highlighted excerpt of Jane Street’s motion argues it traded Terra-linked tokens based on market signals, not insider information. Source: CourtListener
Terraform collapsed in May 2022 after its algorithmic stablecoin, TerraUSD, rapidly lost its peg to the US dollar, sending the price of the highly interconnected LUNA token tumbling and wiping out $40 billion in value.
Jane Street argued in its motion that investors “saw the public signs of that collapse,” and it moved to “sell a deteriorating investment as the market was visibly collapsing.”
The firm claimed that the reasons for Terraform’s collapse had already been decided by a court, noting that its founder, Do Kwon, pleaded guilty to conspiracy and wire fraud charges, for which he was sentenced to 15 years in prison.
Jane Street claimed that Terraform’s complaint was also “self-defeating,” as it had stated that Jane Street’s largest TerraUSD sale took place 10 minutes after “supposed material nonpublic information was visible to the market.”
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It said Terraform also didn’t identify any material, nonpublic information Jane Street received when it alleged the trading firm sold more tokens in early May 2022 as Terraform transitioned to a new liquidity pool.
“Plaintiff pleads ‘on information and belief’ that Jane Street learned the timing of Terraform’s transition to a new liquidity pool through ‘back-channel communications,’ yet cannot identify a single communication disclosing that timing — despite extensive pre-suit discovery,” the motion said.
Jane Street asked the court to dismiss the suit with prejudice, meaning Terraform cannot bring the same lawsuit against it again.
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