The Cryptocurrency Market Crash That Wiped Out $40 Billion—Someone Knew the Outcome 10 Minutes in Advance
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The Cryptocurrency Market Crash That Wiped Out $40 Billion—Someone Knew the Outcome 10 Minutes in Advance
The truth is gradually coming to light.
Navigating Web3 tides with focused insightsBy: Universe Boruto, TechFlow
In May 2022, $4 billion vanished within 72 hours.
It was the most catastrophic collapse in cryptocurrency history. UST—once hailed as the “crown jewel of algorithmic stablecoins”—plummeted from $1 to near-worthlessness within days; Luna, whose market capitalization had neared $40 billion, crashed from a peak of $116 to nearly zero.
Millions of ordinary investors lost their life savings that early summer. They refreshed their screens, staring at the plummeting K-line chart, bewildered—neither understanding what had happened nor knowing what to do next.
An official explanation arrived swiftly: flawed algorithm design, Do Kwon’s lies, and natural market death. Most accepted this answer, filing the catastrophe under “yet another lesson from the crypto world,” and moved on.
This answer held for nearly four years.
Then, on February 23, 2026, Todd Snyder, the bankruptcy liquidator for Terraform Labs, filed a complaint with the U.S. District Court for the Southern District of New York. Jane Street—the world’s most secretive and profitable quantitative trading firm—was thrust into the spotlight.
The question that had remained silent for four years finally received a new version of an answer.
Jane Street and the Secret LUNA Group Chat
To grasp the weight of these allegations, one must first understand who the defendants are.
To most cryptocurrency users, Jane Street may be an unfamiliar name. Yet on Wall Street, it is legendary—a deliberately low-profile firm that quietly became one of the most important players in global financial markets.
In 1999–2000, three former Susquehanna traders—Tim Reynolds, Robert Granieri, and Michael Jenkins—along with IBM developer Marc Gerstein, founded Jane Street in a windowless office in New York. Initially, they engaged in ADR arbitrage—unremarkable and largely unnoticed. But soon they turned their attention to ETFs, then a niche market, and transformed it into their core battleground.
That bet changed everything.
Today, Jane Street ranks among the world’s largest market makers, operating simultaneously across 45 countries and more than 200 trading venues. It holds approximately 24% of the U.S. listed ETF primary market share and executes over $2 trillion in equity trades each month. Its net trading revenue for 2024 totaled $20.5 billion—surpassing Bank of America and rivaling Goldman Sachs. In Q2 2025, its quarterly net trading revenue reached $10.1 billion, with net profits of $6.9 billion—shattering all quarterly records previously held by major Wall Street investment banks.
With 3,000 employees, no CEO, and no traditional hierarchy, compensation is distributed across the entire firm based on overall profit. Jane Street describes itself as “a collective of puzzle solvers”; outsiders call it an “anarchist commune”—flat, enigmatic, and almost entirely closed off to the media.
Among its alumni is a household name: SBF joined Jane Street in 2014 after graduating from MIT, honing his trading instincts there for three years before departing in 2017 to found Alameda Research and FTX. The people trained by this firm profoundly reshaped the cryptocurrency landscape—whatever the nature of that transformation.
Now, this firm—renowned for its “low profile, precision, and perpetual information advantage”—has taken a seat in the defendant’s dock.
At the heart of the allegations lies a private group chat named “Bryce’s Secret.”
Its creator was Bryce Pratt, a Jane Street employee who had previously interned at Terraform. After leaving Terraform for Jane Street, he retained ties to both sides—doors remained open on both ends.
In February 2022, Pratt invited former Terraform colleagues into this private channel, establishing an information conduit linking Terraform’s internal operations with Jane Street—on the other end stood Terraform’s software engineers and business development leads. The complaint alleges that through this channel, Jane Street learned in advance of Terraform’s secret plan to withdraw liquidity from Curve’s pool—a decision not yet disclosed publicly.
At 5:44 p.m. on May 7, just ten minutes after Terraform Labs secretly withdrew $150 million in UST from Curve’s 3pool, a wallet allegedly linked to Jane Street followed suit, pulling out $85 million in UST—the largest single transaction ever executed in that pool.
By May 9, UST had already fallen to $0.80, with collapse signs unmistakable. At this point, Pratt messaged Do Kwon and the Terraform team via the group chat, indicating that Jane Street might consider “buying Luna at a steep discount.”
While retail investors were being harvested, Jane Street was already preparing to scavenge amid the flames.
Named defendants in this case include not only Pratt but also Robert Granieri, co-founder of Jane Street and the sole remaining founder still employed there, along with employee Michael Huang. Citing the Commodity Exchange Act and the Securities Exchange Act, the complaint levels fraud and unjust enrichment claims, demanding a jury trial and seeking damages plus disgorgement of ill-gotten gains.
According to Bloomberg’s summary of the complaint’s core assertion: Jane Street’s actions enabled it to “square off hundreds of millions of dollars in potential risk exposure at precisely the right moment—hours before the collapse of the Terraform ecosystem.”
Jump Trading and Deeper Darkness
The Jane Street lawsuit is not an isolated incident. Two months earlier, the same liquidator, Todd Snyder, had already sued Jump Trading—and its co-founder William DiSomma and former Jump Crypto CEO Kanav Kariya—in the U.S. District Court for the Northern District of Illinois, seeking $4 billion in damages.
In some respects, Jump’s story is even more alarming than Jane Street’s.
The complaint reveals a picture previously unarticulated in full: as early as May 2021—during UST’s first de-pegging crisis—Jump secretly purchased roughly $20 million worth of UST, stabilizing its price back to $1.
Later, the public embraced the polished narrative of algorithmic stability—that the algorithm worked, that the system was self-healing. Terraform thus evaded regulatory scrutiny, while Jump, in exchange, acquired over 61 million Luna tokens at $0.40 apiece—roughly 99% below the prevailing market price of $90. According to the complaint’s estimates, Jump later sold these tokens for approximately $1.28 billion in profit.
During the final collapse in May 2022, the Luna Foundation Guard transferred nearly 50,000 bitcoins (valued at ~$1.5 billion) to Jump without any written agreement, nominally for market stabilization. Where those bitcoins ultimately went remains unconfirmed; the complaint states: “Whether Jump further enriched itself using them remains unclear.”
Notably, DiSomma and Kariya invoked the Fifth Amendment of the U.S. Constitution hundreds of times during prior SEC investigations, refusing to answer questions. Jump’s subsidiary Tai Mo Shan settled with the SEC and CFTC in 2024 for $123 million, admitting to “misleading investors.” Kariya resigned as CEO of Jump Crypto in the same year, citing an ongoing CFTC investigation.
More critically, according to statements in the Jane Street complaint, Jane Street obtained part of its “material non-public information” through Jump’s information channels. These two cases are thus linked by an invisible thread.
But this story has another half.
Jane Street’s response was direct: calling the lawsuit “desperate” and “a transparent attempt to extract money from the company.” It added that losses suffered by Terra and Luna investors stemmed from “billions of dollars in fraud engineered by Do Kwon and Terraform’s management,” and vowed a vigorous defense.
That statement isn’t inaccurate. Do Kwon admitted guilt on fraud charges and was sentenced to 15 years in prison; Terraform paid a $4.47 billion fine. Luna’s death spiral was structurally inevitable from its inception: algorithmic stablecoins fundamentally rely on sustained buying pressure and confidence—if panic triggers, the arbitrage mechanism operates in reverse, destroying the system at exponential speed.
Yet “Do Kwon is guilty” does not logically imply “others are innocent.”
A building may indeed have a fatal structural flaw—that’s factual. Whether someone, before firefighters arrived, secretly removed its most valuable contents during the collapse is a separate legal and moral question.
One additional detail warrants attention. On the very day the Jane Street lawsuit broke, on-chain investigator ZachXBT announced he would release “a major investigation into one of the most profitable institutions in the crypto industry on February 26, 2026—a probe revealing long-standing insider trading by multiple employees using confidential data.” He did not name names—but the timing was too precise to ignore, sending the entire crypto Twitter community into breathless anticipation.
This story is far from over. But one thing is already clear: in this so-called “decentralized” market, real asymmetry never disappeared—it merely migrated from bank trading desks to behind on-chain smart contracts, persisting in even more covert forms.
The Luna episode may simply represent the most violent rupture along that fault line—and those standing on the other side had already evacuated safely before the walls fell.
“The wealthy get their money back in full; ordinary people split theirs three-sevenths.” So it goes in film—and so it goes in crypto.
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