Jane Street Accused of Using Secret Telegram Chat to Profit From Terra Collapse

TLDR

• Terraform Labs’ estate is suing Jane Street for allegedly using insider information to dump $192 million in TerraUSD before its 2022 collapse
• A private Telegram group called “Bryce’s Secret” is alleged to have been the channel for non-public information
• Jane Street allegedly sold 193 million UST tokens, with an $85 million trade on Curve Finance nine minutes after Terraform withdrew liquidity
• The firm then allegedly shorted Terra tokens, making around $134 million in profit
• Jane Street denies the claims, calling the lawsuit “baseless” and “opportunistic”

One of Wall Street’s biggest trading firms is facing federal lawsuit allegations that it used a secret Telegram group to profit from the collapse of the Terra crypto ecosystem in 2022.

Terraform Labs’ bankruptcy estate has filed suit against Jane Street in Manhattan federal court. The estate claims Jane Street used non-public information to sell $192 million worth of TerraUSD, known as UST, just before the stablecoin lost its dollar peg.

The Telegram Group at the Center of It All

The private Telegram channel, nicknamed “Bryce’s Secret,” is alleged to have been the conduit for insider information. The chat is named after Bryce Pratt, a former Terraform intern who later joined Jane Street.

According to the complaint, Pratt stayed in contact with former colleagues still inside Terraform Labs. The estate says those conversations gave Jane Street an informational edge before the collapse began.

In one internal message cited in the suit, Pratt allegedly joked that colleagues should be “slightly pleased” about having an “informational advantage.”

How the Alleged Trades Played Out

The lawsuit says Jane Street sold its entire UST position on May 7, 2022. That included 193 million tokens, with an $85 million trade executed on the decentralized exchange Curve Finance.

That trade came just nine minutes after Terraform quietly pulled $150 million of UST liquidity from the same Curve pool. Public analysis of the Terra collapse had previously flagged that large Curve swap as a key trigger in pushing UST off its peg. The lawsuit now alleges the wallet behind it belonged to Jane Street.

After exiting UST near its $1 value, Jane Street allegedly built short positions as Terra’s ecosystem unraveled. Those bets reportedly generated around $134 million in profit.

When a crypto analytics firm later told a Jane Street contact the firm had “made a killing,” internal communications show traders discussing how to “decommission” wallets after they were identified.

Jane Street Pushes Back

Jane Street has filed a motion to dismiss the case. A company spokesperson said the lawsuit is “a transparent attempt to extract money” and that losses from the Terra collapse were the result of fraud by Terraform’s own management.

The firm says its trades were based entirely on public information and has called the allegations “baseless” and “opportunistic.”

The suit also names Jane Street co-founder Robert Granieri and trader Michael Huang. It alleges violations of federal securities laws and the Commodity Exchange Act.

A 2023 federal court ruling in a separate SEC case found that UST and Luna qualify as securities, which strengthens the legal basis of the new complaint.

Terra’s collapse wiped out roughly $40 billion in market value across UST and its sister token Luna within days in May 2022. Terraform co-founder Do Kwon has since faced criminal charges across multiple jurisdictions.

Five days after UST hit its lowest point, Jane Street offered Terraform’s head of research a job. He started two weeks later, according to the complaint.

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