The collapse of TerraUSD in May 2022 wiped out roughly $40 billion in value. Now, bankruptcy court filings allege that Wall Street trading powerhouse Jane Street saw it coming.
Jane Street allegedly sold approximately $193 million worth of UST on May 7, 2022, just before the stablecoin lost its dollar peg and imploded. The firm then reportedly profited around $134 million by shorting the token as the broader Terra ecosystem collapsed.
At the center of the allegations is a private Telegram group called "Bryce's Secret," linked to a former Terraform Labs intern. On May 7, 2022, Terraform Labs withdrew $150 million in UST. Shortly after, Jane Street reportedly withdrew $85 million. The proximity of these withdrawals, combined with the alleged Telegram connection, forms the backbone of the insider trading claim.
Jane Street has firmly denied any wrongdoing, arguing every trade was based on publicly available information. The firm also invokes the Wagoner rule, a legal doctrine that generally prevents a bankrupt entity's estate from suing third parties for harm the debtor itself caused.
The outcome hinges on whether the bankruptcy court finds the Telegram connection substantive enough to overcome Jane Street's jurisdictional and legal challenges.