The answer after four years of silence: Analysis of Jane Street insider trading allegations and LUNA collapse responsibility

In May 2022, the crypto world experienced one of the most devastating collapses in history. Once hailed as the model algorithmic stablecoin, UST depegged, and within just a few days, over $40 billion in market value vanished, with LUNA’s price plummeting toward zero from its peak.

LUNA price collapse chart, source: CoinMarketCap

Four years later, a lawsuit filed in the Manhattan Federal Court has shifted the narrative in a new direction. The bankruptcy trustee for Terraform Labs accuses the world’s most mysterious and profitable quant trading giant, Jane Street, of being the one who may have known the outcome in advance.

Jane Street and “Bryce’s Secret”

To understand the core of the allegations, one must know about a private chat group called “Bryce’s Secret.” According to the complaint, Jane Street employee Bryce Pratt was an intern at Terraform. In early 2022, he created a private channel connecting the two companies. The lawsuit alleges that through this secret communication channel, Jane Street gained early knowledge of Terraform’s critical decision to quietly withdraw funds from the Curve liquidity pool—information that was never publicly disclosed.

Rewinding to May 7, 2022, at 5:44 PM. Just ten minutes after Terraform Labs quietly withdrew 150 million UST from Curve’s 3pool, a wallet allegedly linked to Jane Street followed suit, pulling out 85 million UST from the same pool. This was the largest single transaction ever recorded in that pool.

The liquidator’s complaint states that Jane Street’s alleged insider trading enabled it to “hedge potential risks worth hundreds of millions of dollars at the right moment, just hours before Terraform’s ecosystem collapsed.” This large-scale withdrawal before the market crash intensified panic and is viewed as a key driver accelerating the UST depegging and LUNA’s death spiral.

The Double Role of a Quant Giant

As one of the world’s largest quant trading firms, Jane Street manages hundreds of billions of dollars and plays a crucial market-making role in both traditional finance and crypto markets. Its alumni include FTX founder SBF, which hints at its indirect connections to several major crises in the crypto industry.

However, this lawsuit against Terraform marks the first time these connections are directly linked to alleged illegal insider trading. Jane Street’s response has been straightforward. A spokesperson called the lawsuit a “desperate attempt” and “an obvious money grab from the company.” The firm insists that Luna holders’ losses stem from Do Kwon and Terraform’s own orchestrated “billions of dollars fraud.”

Deeper Darkness and Industry Reflection

Jane Street’s case is not isolated. Two months earlier, the same liquidator filed a $4 billion claim in the Chicago Federal Court against another trading giant, Jump Trading, accusing it of playing a dishonorable role in the Luna collapse.

Together, these lawsuits paint a troubling picture: beneath the veneer of “decentralization” and “transparency” in crypto, information asymmetry has never disappeared. As ordinary investors see their funds evaporate in the death spiral, do institutions with informational advantages and advanced trading tools already exit safely, or even profit from the chaos?

Conclusion

Currently, the allegations against Jane Street are still in the litigation phase, and no court has issued a ruling. Jane Street firmly denies all misconduct and is preparing to defend itself vigorously. Regardless of the final outcome, this case forces the market to reconsider the boundaries of market makers’ responsibilities within the crypto ecosystem.

The question of “Should they be held responsible for one of the biggest crashes in crypto history, LUNA?” may take time for legal resolution, but the discussion about market fairness has already been reignited.