Jane Street: Why a Wall Street Giant Keeps Appearing in Crypto’s Biggest Collapses

Jane Street has returned to the spotlight after Terraform Labs’ bankruptcy estate accused the trading firm of insider trading tied to the May 2022 collapse of TerraUSD (UST) and $LUNA.

The lawsuit alleges Jane Street used non-public information about Terraform’s liquidity withdrawals to exit positions and profit before the stablecoin lost its dollar peg.

Terraform Lawsuit Puts Jane Street Back Under Scrutiny

According to the complaint, Terraform quietly removed about $150 million of liquidity from Curve pools that supported UST. Shortly afterward, wallets linked to Jane Street allegedly withdrew or sold tens of millions of dollars worth of UST.

Terraform claims these actions accelerated the loss of confidence that triggered a broader collapse, wiping out about $40 billion in value.

However, these remain allegations. Jane Street has denied wrongdoing and said it will defend itself in court. No court has yet ruled on the claims.

A pattern of Indirect Links to Major Crypto Failures

Jane Street’s name has also surfaced repeatedly in connection with other major crypto collapses, including FTX. However, the firm has not been accused of wrongdoing in the FTX case.

Instead, the connection comes through people. Sam Bankman-Fried, founder of FTX and Alameda Research, previously worked as a trader at Jane Street. Alameda CEO Caroline Ellison also began her career at the firm.

These links reflect Jane Street’s role as a major training ground for quantitative traders. However, there is no verified evidence that Jane Street, as a company, played any role in FTX’s fraud or collapse.

Investigators have attributed the collapse to internal misuse of customer funds by FTX and Alameda leadership.

Jane Street’s Role as a Market Maker in Crypto

Jane Street operates as a global quantitative trading firm and liquidity provider. It uses algorithms and statistical models to trade stocks, bonds, ETFs, and increasingly, cryptocurrencies.

The firm does not run crypto exchanges or issue tokens. Instead, it acts as a market maker.

Market makers provide liquidity by continuously buying and selling assets, helping markets function smoothly.

Because of this role, Jane Street interacts with many crypto companies as a trading counterparty. This exposure often places it close to major market events, including collapses.

Jane Street became one of the largest crypto market makers during the industry’s rapid growth between 2020 and 2022. It traded on major exchanges and provided liquidity across multiple crypto assets.

This scale means its trading activity often appears in blockchain records and liquidity pools. However, visibility does not imply causation.

Regulators and courts have not found Jane Street liable for causing any major crypto collapse. The Terraform lawsuit marks the first major legal claim directly accusing the firm of wrongdoing related to a crypto failure.

Legal outcome could shape future scrutiny

The Terraform case may clarify whether Jane Street’s trading activity crossed legal boundaries or reflected standard market-making behavior.

The outcome could also shape how courts interpret insider information in decentralized markets.

For now, Jane Street remains a powerful but largely behind-the-scenes player in crypto. Its influence reflects its scale, technical expertise, and role in providing liquidity — even as questions about its involvement continue to emerge.

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