Jane Street Sued: Allegedly Used Internal Telegram Messages to Exit and Short Terra Before Its Collapse, Profiting $134 Million
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Jane Street Sued: Allegedly Used Internal Telegram Messages to Exit and Short Terra Before Its Collapse, Profiting $134 Million
$192 million worth of UST sold off—entirely via Telegram’s secret chat, “Bryce’s Secret.”
Navigating Web3 tides with focused insightsAuthor: CoinDesk
Translation & Editing: TechFlow
TechFlow Intro: Jane Street, one of Wall Street’s top trading firms, is accused of obtaining material nonpublic information via private Telegram chats ahead of the Terra collapse, enabling it to exit its positions precisely and profit $134 million by shorting the market. This lawsuit not only exposes the informational advantages enjoyed by traditional financial giants in crypto markets but also gains stronger legal footing following a 2023 federal court ruling that classified UST and Luna as securities—offering investors critical insights into institutional conduct and market manipulation.
Jane Street Group, one of Wall Street’s largest trading firms, is accused of selling $192 million worth of TerraUSD (UST) stablecoins before Terra’s May 2022 collapse, leveraging a private Telegram channel with insiders at Terraform Labs, according to newly unsealed court documents filed in Manhattan’s federal court.
The lawsuit was brought by the bankruptcy estate administrator overseeing the liquidation of Terraform’s assets. Last week, an amended version reduced redactions and disclosed new details about how Jane Street allegedly obtained nonpublic information during the implosion of the Terra ecosystem.
Jane Street denied the initial allegations filed in February, calling them “desperate” and “baseless,” and has asked the court to dismiss the case.
According to the complaint, Jane Street’s informational advantage allegedly stemmed from a private Telegram “backdoor” channel between Bryce Pratt—a former Terraform Labs intern who was then employed at Jane Street—and his former Terraform colleagues.
The bankruptcy administrator alleges this access enabled Jane Street to sell its UST holdings near par value just before the algorithmic stablecoin’s collapse, then establish short positions and reap approximately $134 million in profits as Terra’s $40 billion ecosystem unraveled.
In one internal communication cited in the lawsuit, Pratt reportedly joked that colleagues should feel “slightly pleased” about their “informational advantage.”
Leveraging this advantage, Jane Street allegedly sold its entire UST position on May 7, 2022, disposing of roughly 193 million tokens. Its largest single trade involved selling $85 million worth of UST on the decentralized exchange Curve Finance—just nine minutes after Terraform had quietly withdrawn $150 million in UST liquidity from that same pool.
This trade is significant because public post-mortems of the Terra collapse have long focused on a large swap on Curve that helped push the token away from its $1 peg. The lawsuit now alleges that the wallet executing that swap belonged to Jane Street.
When a crypto analytics firm later told a Jane Street contact that the firm had “made a killing,” internal communications cited in the case show traders worrying about how their wallets were identified—and then discussing how to “deactivate” them.
“This lawsuit is a transparent attempt to extract money in the well-known context of losses suffered by Terra and Luna holders—losses caused by billions of dollars in fraud perpetrated by Terraform Labs’ management,” said a Jane Street spokesperson. “As demonstrated by our motion to dismiss filed with the court last month, we will vigorously defend ourselves against these baseless, opportunistic allegations.”
The lawsuit also names Jane Street co-founder Robert Granieri and trader Michael Huang. It alleges violations of federal securities laws and the Commodity Exchange Act, and seeks disgorgement of profits to repay creditors.
A 2023 federal court ruling in a separate U.S. Securities and Exchange Commission case determined that UST and Luna qualified as securities—a finding that strengthens the legal foundation of this new lawsuit.
The complaint states that on May 18, 2022—five days after UST hit its nadir—Jane Street extended a job offer to Terraform’s head of research, who joined the firm two weeks later.
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