Terraform Labs Sues Jane Street for Alleged Insider Trading in $40 Billion Crypto Collapse
New York, Thursday, 26 February 2026.
A federal lawsuit filed Monday alleges Jane Street used insider secrets from a former intern to front-run the 2022 Terra collapse. The complaint claims the trading giant withdrew $85 million in TerraUSD just ten minutes after Terraform’s own internal moves, reportedly avoiding $200 million in losses while accelerating a $40 billion market wipeout. This legal battle brings intense scrutiny to institutional hedging strategies amidst Bitcoin’s current volatility.
Anatomy of an Alleged Betrayal
The legal complaint, filed on Monday, February 23, 2026, in the U.S. District Court for the Southern District of New York, outlines a specific sequence of events centered on the actions of Terraform Labs’ bankruptcy administrator, Todd Snyder [3][5]. The lawsuit names Jane Street Group LLC, its co-founder Robert Granieri, and traders Michael Huang and Bryce Pratt as defendants, accusing them of exploiting non-public information to execute trades that worsened the 2022 crypto crisis [3][5]. According to the filing, the alleged scheme hinged on a chat group explicitly named “Bryce’s Secret,” where Pratt—who had interned at Terraform Labs in the summer of 2021 before joining Jane Street that September—allegedly maintained a backchannel to his former employer [1][3]. The plaintiff argues this channel provided Jane Street with “unique access” to Terraform’s internal maneuvers, an advantage described by Snyder as impossible to replicate through legitimate market analysis [1].
A Pattern of Global Regulatory Scrutiny
This lawsuit arrives as Jane Street faces compounding regulatory challenges across different jurisdictions. In July 2025, the Securities and Exchange Board of India (SEBI) issued a 105-page enforcement order against the firm, barring it from Indian securities markets due to alleged manipulation of the BANKNIFTY and NIFTY 50 indices [1][3]. SEBI’s investigation concluded that Jane Street utilized high-frequency algorithmic strategies to generate approximately $4.3 billion (₹36,502 crore) in profits between January 2023 and March 2025 [1][3]. The regulator described the firm’s activities as exploiting “privileged speed and scale” to extract illicit gains, a narrative that parallels the front-running accusations now leveled in New York [1][3]. Legal proceedings in India remain active, with an appellate hearing between the firm and the regulator adjourned just yesterday, February 25, 2026 [3].
Market Defense and Institutional Footprint
Despite these legal headwinds, Jane Street remains a titan in the financial infrastructure, generating $20.5 billion in net trading revenue in 2025 and handling roughly 10% of all U.S. equity trades [3]. The firm vehemently denies the Terraform allegations, pledging to defend itself against what it terms “opportunistic claims” [4][5]. Market observers note that the firm continues to deepen its involvement in the cryptocurrency sector; as of the fourth quarter of 2025, Jane Street served as an authorized participant for BlackRock’s iShares Bitcoin Trust (IBIT), holding approximately 20.3 million shares valued at $790 million [1][3]. Furthermore, the firm has aggressively expanded its indirect crypto exposure, increasing its position in MicroStrategy by 473% to 951,187 shares—a massive accumulation from a previous holding of approximately 166001.222 shares [1]. These positions suggest that despite the “reputational overhang,” the firm remains steadfast in its high-stakes engagement with digital asset markets [1][3].