Terraform Labs Sues Jane Street Over $40B Terra Crash

Four years after the TerraUSD stablecoin crashed and wiped out $40 billion in value, a shocking lawsuit has emerged accusing top trader Jane Street of insider tricks that sped up the disaster. Filed this week, the case points fingers at secret deals and quick moves that left everyday investors in ruins. As details pour out, questions swirl about who really pulled the strings in one of crypto’s biggest falls.

The battle kicked off on February 23, 2026, when Todd Snyder, the court-appointed boss handling Terraform Labs’ bankruptcy, filed the suit in a New York federal court. Snyder aims to claw back losses for the company’s creditors and fans who got burned. Jane Street Group and three of its top people stand accused of using inside tips to bet against TerraUSD right before it all fell apart.

This move comes as part of winding down Terraform after its 2022 mess. The complaint, clocking in at 83 pages, names Jane Street co-founder Robert Granieri and traders Michael Huang and Bryce Pratt as key players. They face claims of front-running trades, a fancy term for jumping ahead of others with secret knowledge.

Snyder says the firm knew about big shifts in liquidity from private chats. One single act involved yanking $85 million in TerraUSD from a key trading pool just minutes after Terraform did the same.

Allegations of Insider Trading Emerge

At the heart of the claims, Jane Street allegedly tapped into a private Telegram group called “Bryce’s Secret” for non-public info. This let them unwind hundreds of millions in risky bets hours before the stablecoin lost its dollar peg. The suit blasts this as a rigged game that exploited Terraform’s weak spots and fueled the rapid drop in value.

Retail folks, the everyday buyers, watched their savings vanish as TerraUSD plunged from $1 to pennies. Meanwhile, Jane Street pocketed gains from short sales, bets that the price would tank.

The complaint details how the firm shorted TerraUSD while in the know about liquidity pulls. This timing, Snyder argues, turned a shaky system into a full meltdown.

Experts note that such actions could violate securities laws, even in the wild world of crypto.

Roots of the 2022 Terra Meltdown

Back in May 2022, TerraUSD was meant to stay steady at $1 through smart algorithms tied to its sister token Luna. But when big sellers hit, the peg broke, and Luna’s value skyrocketed to cover it, leading to a death spiral. The collapse erased over $40 billion in market worth, shaking the whole crypto scene and helping sink giants like FTX.

Do Kwon, Terraform’s co-founder, pitched Terra as a safe haven for stable money in digital finance. He faced fraud charges and pleaded guilty last year. In December 2025, a U.S. court handed him 15 years behind bars for the scam.

The event exposed risks in algo-stablecoins, where code replaces real cash backups. Billions flowed into Terra, drawing in newbies and pros alike.

This table shows how fast things unraveled, from early wobbles to total crash.

Jane Street Fights Back Hard

Jane Street wasted no time pushing back. A company spokesperson called the suit a “desperate” grab for cash from a failed project. They vow to fight the “baseless” charges in court and point the finger at Terraform’s own fraud under Kwon.

The firm, known for speedy trades in stocks and now crypto, says the real blame lies with management lies that duped everyone. Losses came from that multi-billion scam, not their moves.

As the case heats up, whispers grow about a big probe from on-chain sleuth ZachXBT, set to drop on February 26. It hints at wider insider abuse at profitable crypto outfits, fueling bets on markets like Polymarket.

• Watch for court filings that could unredact more secrets.
• Track crypto prices, as old scandals often stir fresh volatility.
• Stay alert to rules tightening on stablecoins after this.

This defense sets up a clash of giants, with Terraform’s estate chasing justice and Jane Street guarding its rep.

The saga of Terra’s fall reminds us how fragile trust is in digital money, hitting hard for those who lost life savings in the blink of an eye. This lawsuit could uncover truths that change how we view big players in crypto, offering hope for accountability amid past pains.