The Luna drama just added a new chapter: Terraform Labs’ liquidation administrator has officially sued prominent trading firm Jane Street, accusing it of insider trading that accelerated the catastrophic Terra collapse.
Filed within the bankruptcy proceedings, the lawsuit alleges Jane Street used non-public information to front-run the market, profiting massively while the ecosystem imploded.
This $40 billion crash didn’t just kill a token: it triggered a contagion that wiped out savings for thousands of investors. Now, creditors are looking for someone other than founder Do Kwon to pay the bill.
[ ZOOMER ]
TERRAFORM LABS SUES JANE STREET FOR FURTHERING COLLAPSE OF LUNA , USED INSIDER INFORMATION TO. WITHDRAW FUNDS AHEAD OF CRASH: WSJ
— zoomer (@zoomerfied) February 23, 2026
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Terraform Labs Has Sued Jane Street: Rigging the Game
The core allegation is simple: Jane Street allegedly cheated. The complaint claims the firm used a former Terraform Labs employee to get secret information about upcoming liquidity changes.
On May 7, 2022, Terraform Labs withdrew $150 million worth of UST (their stablecoin) to adjust liquidity. The lawsuit claims Jane Street knew this was coming and sold off approximately $85 million in UST just minutes before the move became public knowledge.
This massive sell pressure helped push UST off its $1.00 peg, triggering the death spiral that erased $40 billion from the market. While insider trading accusations are flying, this mirrors other recent crackdowns, such as when five suspects were arrested for insider trading on Polymarket.
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Did Wall Street Exploit Crypto’s Structural Flaws?
This isn’t your typical story of a shady offshore crypto exchange doing bad things. Jane Street is Wall Street royalty.
They are a massive quantitative trading firm and a market maker. Accusing Jane Street of rigging a market is a massive escalation. It suggests that the “smart money” institutional players were not just participating in crypto. They were allegedly exploiting structural weaknesses to extract profit at the expense of retail holders.
This isn’t the first time the firm has faced scrutiny. We have previously covered allegations regarding Jane Street’s Bitcoin manipulation tactics, where aggressive selling strategies were questioned.
Jane Street has reportedly disputed the claim, arguing that the collapse was caused by the “multibillion-dollar fraud” of Terraform’s own management, specifically Do Kwon, rather than their trading activity. They intend to defend themselves vigorously.
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ZachXBT Mentions a Major Investigation Dropping Soon: Just A Coincidence?
NEW: Major investigation dropping February 26 on one of crypto’s most profitable businesses where multiple employees abused internal data to insider trade over a prolonged period of time. pic.twitter.com/Losou2CZ2N
— ZachXBT (@zachxbt) February 23, 2026
Prominent blockchain sleuth ZachXBT announced on X that he’s set to release a major investigation on February 26, 2026. The probe targets “one of crypto’s most profitable businesses,” where several employees allegedly misused internal data for insider trading over an extended time.
This teaser comes just a day after news broke of a lawsuit filed by Terraform Labs’ bankruptcy administrator against trading giant Jane Street.
The timing raises eyebrows: ZachXBT’s reveal follows hot on the heels of the lawsuit publicity. Could they be linked? Jane Street fits the bill as a highly profitable crypto player, and the insider trading allegations mirror ZachXBT’s description. While no direct confirmation exists, the coincidence suggests his report might delve into or expand on these claims, potentially uncovering more evidence of wrongdoing in the Terra debacle.
This is going to be a heavyweight legal battle. Jane Street has endless resources and will likely file a motion to dismiss, arguing that their trades were legitimate market strategies, not insider abuse.
We are also watching to see if this triggers action from federal regulators. If a court decides a major US trading firm helped crash Terra, the SEC might look closer at other institutional trades from the 2022 contagion.
For now, the focus remains on the courtroom. Do Kwon is already facing prison time, but the hunt for the rest of the missing billions is far from over.
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The post Terraform Labs Has Sued Jane Street for Insider Trading Before Terra Collapse appeared first on 99Bitcoins.
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