Terraform Labs’ bankruptcy administrator on Monday sued market making firm Jane Street for alleged insider trading during the 2022 Terra-Luna collapse, claiming the firm used a private group chat titled “Bryce’s Secret” to obtain non-public information and front-run the $40 billion implosion.
The 10-Minute Window
The lawsuit centers on May 7, 2022, when Terraform quietly withdrew 150 million TerraUSD from Curve’s 3pool without announcing it, the Wall Street Journal reported on Monday.
Less than 10 minutes later, a wallet allegedly linked to Jane Street withdrew 85 million TerraUSD from the same pool—at the time, the largest transaction ever recorded there.
The combined removal of 235 million UST severely destabilized liquidity. TerraUSD slipped below its $1 peg and panic spread.
Administrator Todd Snyder claims Jane Street front-ran the developing crisis, allowing it to liquidate hundreds of millions in high-risk positions before the broader market reacted.
The firm’s actions both shielded it from catastrophic losses and accelerated the collapse, according to the 83-page complaint filed Monday in Manhattan federal court.
The lawsuit alleges Jane Street used non-public information to unwind exposure “at precisely the right time, mere hours before the Terraform ecosystem collapsed.”
The ‘Bryce’s Secret’ Chat
The complaint names Jane Street co-founder Robert Granieri and employees Bryce Pratt and Michael Huang. Pratt, a former Terraform intern, allegedly established a private group chat in February 2022 titled “Bryce’s Secret” with a Terraform software engineer and the company’s head of business development.
This channel allegedly enabled transmission of sensitive information to Jane Street.
The lawsuit claims Pratt initiated email communications connecting Terraform personnel with Jane Street’s DeFi team, providing what Snyder calls “material non-public information.”
On May 9, with TerraUSD trading below $0.80, Pratt allegedly initiated communications with Do Kwon and Jane Street colleagues proposing to purchase Bitcoin (CRYPTO: BTC) or LUNA (CRYPTO: LUNA) at substantial discounts.
The filing also references Jump Trading co-founder Bill DiSomma, suggesting Jane Street received additional information about potential Terraform fundraising efforts.
The Jump Trading Connection
Snyder sued Jump Trading for $4 billion in December, claiming Jump “actively exploited” the Terraform ecosystem.
Jump allegedly appears in the latest complaint against Jane Street, with Snyder claiming some non-public information was leaked to Jane Street through Jump Trading.
Jane Street’s Defense
Jane Street called the lawsuit “desperate” and “baseless,” arguing losses resulted from “multi-billion dollar fraud perpetrated by the management of Terraform Labs.”
The firm vowed to defend itself vigorously.
Do Kwon pleaded guilty to fraud and was sentenced to 15 years in prison in December.
A judge called his crime “a fraud of epic generational scale.” Terraform agreed to pay the SEC $4.47 billion in penalties.
Image: Shutterstock
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