Terra Collapse: Did Wall Street Giants Know in Advance and Flee?...Secret Telegram Chat Room Surfaces

▲ Terraform Labs, TerraUSD (UST), Cryptocurrency, Bankruptcy, Jane Street/AI Generated Image

An accusation has been made that a large US trading firm operated a secret chat room with insiders to obtain undisclosed information, and based on this, reaped astronomical illicit profits from the worst collapse in virtual asset history.

Bitcoinist, a virtual asset specialized media outlet, reported on May 21 (local time) that Todd Snyder, the liquidator of the bankrupt Terraform Labs, filed an amended lawsuit against Jane Street, a major Wall Street trading firm, co-founder Robert Granieri, and its traders. Terraform Labs claimed that Jane Street obtained undisclosed inside information through unofficial channels, including a secret Telegram chat room, and accelerated the collapse of the TerraUSD (UST) stablecoin through front-running using this information.

Terraform Labs had already sued them in February in Manhattan federal court for misappropriation of confidential information and market price manipulation, and added specific circumstances through this amended lawsuit. According to court documents, Jane Street traders opened a secret Telegram chat room called 'Bryce's Secret,' named after Bryce Pratt, a former Terraform Labs intern who now works at Jane Street, to obtain inside information. The channel was reportedly created on February 22, 2022, and was participated in by Pratt and former colleagues, including Terraform Labs' head of business development.

Terraform Labs claimed that Pratt continuously demanded sensitive undisclosed information, such as virtual asset information, company asset status, operational strategies, and liquidity needs, by leveraging his Terraform Labs connections for several months before the TerraUSD distribution. Terraform Labs explained that Jane Street, based on this information, sold all its holdings on May 7, 2022, just before the TerraUSD collapse, to avoid losses and maximize profits.

Terraform Labs claimed, “Just hours after Jane Street dumped its TerraUSD holdings onto the market, TerraUSD's $1 peg broke, and the entire Terra ecosystem, including TerraUSD and LUNA virtual assets, entered a 'death spiral' of hell.” It further criticized Jane Street for using confidential information to build large short positions on TerraUSD and LUNA, and generating additional profits from the crash they triggered.

According to the complaint, Jane Street liquidated its entire TerraUSD position, worth approximately $193 million, while the peg was still maintained, thereby avoiding losses. It was also stated that they made $134 million in short-selling profits through TerraUSD and LUNA short positions. Terraform Labs argued that Jane Street dumped its holdings on the market in a single day, triggering the initial peg collapse, which resulted in massive damage to Terraform Labs and its investors.

Jane Street countered directly by filing a motion to dismiss the lawsuit in April. Jane Street argued that Terraform Labs was attempting to shift the costs incurred by its executives' fraudulent activities onto Jane Street. It further argued that the multi-billion dollar collapse was the responsibility of Terraform Labs' management, and that the transactions in question were normal investments made after negative information about TerraUSD and LUNA had already been disclosed to the market.

The legal battle between the two sides over the culprits behind the Terra ecosystem collapse and accountability is expected to intensify. Terraform Labs claims that Jane Street manipulated the market using undisclosed information, while Jane Street counters that Terraform Labs is shifting the blame for the collapse externally.

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