Jane Street seeks to throw out insider trading lawsuit
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Jane Street is seeking to get its name clear of Terraform.
Its connection to Terraform Labs dates back to when it served as a liquidity and market-making partner for the crypto firm.
Founded by Do Kwon in 2018, Terraform Labs was once among the most prominent names in crypto. Until its twin cryptocurrencies, TerraUSD and LUNA, catastrophically collapsed in 2022, wiping out an estimated $40 billion in investor value.
Terraform filed for Chapter 11 bankruptcy in January 2024, and Kwon was sentenced to 15 years in prison after pleading guilty to fraud.
In February 2026, the bankruptcy administrator winding down Terraform's estate sued Jane Street, alleging the firm used non-public information to execute trades that accelerated the collapse.
The complaint accused Jane Street of insider trading and market manipulation, exiting hundreds of millions in crypto exposure mere hours before the ecosystem unravelled.
The '10 AM dump' connection
Jane Street's name had already been circulating in crypto circles well before the lawsuit.
A widely discussed narrative in the community alleged that Bitcoin faced consistent selling pressure every day at precisely 10 AM ET when U.S. markets opened.
Called the "10 AM dump" pattern, crypto analysts and influencers pointed fingers directly at Jane Street.
Popular crypto account Bark on X once accused the firm of running an algorithm to systematically sell Bitcoin at market open for months.
The alleged mechanism was Jane Street, which reportedly held as much as $790 million in BlackRock's iShares Bitcoin Trust (IBIT), allegedly sold Bitcoin at 10 AM daily to then buy IBIT shares at a discount.
Crypto influencer Justin Bechler went further, claiming Bitcoin would be trading at $150,000 today had Jane Street not been suppressing prices.
Notably, analysts observed that the familiar 10 AM dump pattern broke abruptly, right after the lawsuit became public.
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What the latest filing says
On April 23, Jane Street filed a motion to dismiss the case, flatly denying all allegations.
The case, 1:26-cv-01536-DEH, is assigned to Judge Dale E. Ho in the Southern District of New York.
In the court filing, the firm called the lawsuit an attempt to "extract cash from Jane Street to foot the bill for a fraud that Terraform itself perpetrated."
Jane Street argued that the real culprit behind investor losses was the multi-billion dollar fraud committed by Terraform's own management, not its trading activity.
Jane Street also argued its largest trades came after damaging information about UST and LUNA was already public, making the insider trading claims "self-defeating."
The firm pointed out that Terraform's own filing acknowledges the liquidity pool transition it flagged as suspicious was publicly announced weeks earlier and triggered no market reaction.
While Jane Street did build a short position on May 8 and sold assets on May 7, it said Terraform failed to identify any information that was both material and non-public, or cite specific back-channel communications that gave the firm an unfair edge.
Jane Street also invoked the "Wagoner rule," which bars a bankruptcy estate from suing third parties to recover losses caused by its own fraud. It challenged the claims as extraterritorial, arguing Terraform never proved the trades in question actually took place on U.S. soil.
Related: Do Kwon's Trial Postponed as Prosecutors Say DOJ Crypto Pivot Not Applicable
