Jane Street Hit with Terra $40B Insider Trading Suit
disruptionbanking.com
disruptionbanking.com
I'm sure she'll be right on it...
Havel's greengrocer, placing the sign.
Carney at Davos, his eyes uncovered.
Edit: actually someone already found his article and posted it: https://news.ycombinator.com/item?id=47160848
No hard feelings.
> Look, I am sorry. But if you go to Jump Trading and Jane Street and say “hello, I have an unregulated poorly designed mechanism that could lead to $50 billion of market value collapsing overnight, would you like to trade with me,” they are going to say yes, but their eyes are going to light up, you know? If at Time 0 you give them an extremely gameable system that can produce billions of dollars of profit, at Time 10 your system is going to be a smoking wreckage and they are going to have billions of dollars of profit. That’s their whole job, you know? I couldn’t tell you in advance what all the intermediate steps will be, and in fact in hindsight I cannot tell you what the intermediate steps actually were, how Jump and Jane Street made money off the collapse of Terra. But as a heuristic, I mean, come on. Terra was like “hello we have a balloon full of money, here is a pin, dooooooon’t pop the balloon.” Guess what!
https://www.wsj.com/finance/currencies/jane-street-accused-o...
That point was the crux of Matt Levine's argument: Terra and Luna were unregulated and easy-to-game securities. So you can't complain when the smartest people on Wall Street figured out how to pop the balloon in their favor -- (not ai emdash) particularly when it's their job.
I will quote the first few paragraphs leading up to it though:
>The basic story of Terra is:
>Terra was a big crypto project, led by a company called Terraform Labs and a guy named Do Kwon, which at its peak had a market value of about $50 billion.
>It had a token, the currency of its blockchain, called Luna, which at its peak traded at almost $120 per token. It also had an algorithmic stablecoin, TerraUSD, whose mechanism was that it could always be redeemed for $1 worth of Luna.
>That’s a bad idea! The problem, which was extremely obvious and which everyone knew about, was that, if people lost confidence in Luna, there would be a death spiral: People would redeem TerraUSD for Luna and sell the Luna, which would drive down the price of Luna, which would lead to more redemptions, which would create even more Luna, until Luna was trading at a tiny fraction of a penny and every TerraUSD would be redeemed for millions of them.
>In May 2022 that very much happened. Terra collapsed, people lost a lot of money and Do Kwon got 15 years in prison for fraud.
>At its peak, though, Terra was a pretty big crypto project, and it had various dealings with some very smart and somewhat sharky trading firms like Jump Trading and Jane Street.
The thing is you or I don’t get to say what is or isn’t a market that is covered by market abuse laws. Regulators do, and while it’s true to say none of the relevant regulators had stepped up and conclusively shown these markets were under their jurisdiction, they had repeatedly said they were looking into them and given hints they felt they had jurisdiction. Heck, I was in a meeting with Kevin Warsh around 2014 or so[2] where he asked about bitcoin so it’s clear the fed was at least looking into crypto at that time long before they made public comment. ISTR talking to the cftc at the same time and they asked about it too.
So “unregulated” in this context doesn’t mean “not covered by regulation” it means “regulatory status extremely uncertain”. If you want to go in with a very aggressive strategy you’re taking some risk that regulators will post facto go after you because they do that a lot in conventional markets.
[1] Market abuse in this case, but it’s obviously the case in cybersecurity also.
[2] This isn’t some kind of weird boast btw, cbankers and regulators meet with people from industry all the time as part of their normal information-gathering process and he met with a group of us who were working with some bank on detecting things like market abuse. He had some sort of academic position at Stanford at the time iirc looking into various types of bank regulation, but he was still plugged into the fed governors because he had only just left that.
But that is/was the cryptobros argument: Code is Law! And now instead of fixing the algos they're going right to suing each other just like TradFi with TradLaw.
Crypto is the future!
> Ten minutes is not a coincidence. It is a trade.
- "A new lawsuit doesn’t just revisit the $40 billion Terra-Luna meltdown; it questions whether..."
- "Ten minutes is not a coincidence. It is a trade."
- "It reads less like a rescue offer and more like a firm positioning itself..."
- "These are not isolated; they are part of Snyder’s broader efforts..."
- "Not just as bystanders, but as alleged participants..."
"A new lawsuit doesn’t just revisit the $40 billion Terra-Luna meltdown; it questions whether..." -- the purpose of a lawsuit is to question something (by making an allegation), you don't sue someone to "revisit".
"Ten minutes is not a coincidence. It is a trade." So is an hour, or thirty seconds, or...?
"Not just as bystanders, but as alleged participants" -- the "just" doesn't make sense; participants aren't bystanders.
Of the list, only "It reads less like a rescue offer" and "These are not isolated; they are part of Snyder’s broader efforts..." makes any sense in context.
It's as if they're optimizing for all the surface-level indicators of well-formed, meaningful thought, without the actual substance to back that up.
It also doesn't help that all the title graphics have the same dramatic feeling and are certainly AI generated.
Yes! You put your finger on what bugs me about "no LLM" rules. It's not that LLMs writing isn't uniquely bad, but that it tends towards low quality clickbaity prone writing we already see everywhere. Banning LLM content is redundant.
Side note, I'd guess LLMs don't tend towards vapid writing just because of clickbaity training material. Rather it's more fundamental. Writing well takes effort and energy. LLMs seem to avoid effort just like humans. Emotional based reasoning in humans is itself a heuristic system favored by evolution. Thinking is expensive. Emotional slop is cheap.
Imagine you know a guy named Patel. He pirated every movie ever made and is a prolific writer. So prolific, in fact, that he has a blog, called "Patel's Log." On this blog is a review of every movie ever made.
At first, you think that's neat. It's not exactly a book of all knowledge, but it's a significant human achievement, perhaps even historic.
Things take a turn for the worse when you're reading a review in the Times. You recognize Patel's distinctive style, and call him up to ask if the Times stole his post. He says that a Times columnist asked for his opinion, and he sent them a link. It turns out the columnist copied his blog post verbatim: but he says he can't complain without being inconsistent, since he pirated every movie ever made.
You find this humorous, until you recognize his style in the Atlantic - then the Post. Eventually you're disappointed when the Ebert staff publish an opinion piece in favor of Patel's Log matching (PatelLM), and you're forced to wonder if that' what Ebert would have thought.
Your boss sends you copy-pasted PatelLM content in a morning Slack message about a movie she watched over the weekend. Your friends quote Patel's Log verbatim on Discord. Hollywood starts using PatelLM to indirectly plagiarize other movies. Soon, Patel's posts begin to echo each other as the supply of novel perspectives is overwhelmed by PatelLM. Film criticism become a dessicated corpse, filled with plastic and presented in a glass case with a pin through its heart. Thought is dead. There is only Patel.
Copyright laws should be applied to LLMs and their users just like any others. If they verbatim reproduce a post (or near enough), then it should be a copyright violation.
> You find this humorous, until you recognize his style in the Atlantic - then the Post.
There's nothing inherently wrong with humans or LLMs learning to mimic someones style. This is actually a basis for styles and genres, etc. Whole trends in arts are just people copying others style's. Sometimes with little improvements.
> Hollywood starts using PatelLM to indirectly plagiarize other movies. Soon, Patel's posts begin to echo each other as the supply of novel perspectives is overwhelmed by PatelLM. Film criticism become a dessicated corpse, filled with plastic and presented in a glass case with a pin through its heart. Thought is dead. There is only Patel.
How exactly is this different than what Hollywood did pre-LLMs for the last decade or two? LLMs didn't cause the homogenization of culture. Corporate Hollywood and the internet did that.
I don't care if people use LLMs, I care about generating slop. The two correlate, but by concentrating on the LLM part you just let the problem continue. It's extremely frustrating. Slop is slop. Doesn't matter how it is generated or by who. Slop is slop. Doesn't matter if you dress it up and put lipstick on a pig. Slop is slop.
AI is turning the entire web into LinkedIn itisnotaboutism.
So many of the biggest fraudsters in crypto came from tradfi and their scams were discovered because they picked the one asset class where being unable to process withdrawals implies a 100% chance of fraud. It makes you wonder how much fraud occurs in tradfi but it goes undiscovered because nobody can self-custody their paper metals or paper stocks.
Better not mention the FinCEN files either. [0] Where over $100B to $2TN dollars worth of illicit transations from criminals and fraudsters were knowingly allowed by banks and even ponzi schemes were freely allowed as well [1].
[0] https://www.icij.org/investigations/fincen-files/global-bank...
You can't invest in unregulated FTX and then whine when they went and lost all your money -- (not ai emdash) because it was -- wait for it -- UNREGULATED!
Also, unrelated minor pet peeve, but what's the deal with the "not ai emdash"? You can just use dash or comma, you know.
I thought "Code is Law". So now crypto bros want to fight this out in TradLaw just like the TradFi institutions do?
The claim of artificial price inflation with Jump sounds more questionable but TFA doesn’t seem to put it front and centre
I thought the whole idea of crypto is that everything is public on the blockchain. Presumably anyone could have seen the $150m withdrawal and reacted? It doesn't seem very insider information.
It seems extremely unlikely to me, a casual observer of the shit show that was Luna/Terra, that the suit would be successful
If there is one benefit coming from crypto is that it explains clearly why finance is a regulated industry.
https://www.bloomberg.com/opinion/newsletters/2026-02-24/ai-...
"I am sorry. But if you go to Jump Trading and Jane Street and say “hello, I have an unregulated poorly designed mechanism that could lead to $50 billion of market value collapsing overnight, would you like to trade with me,” they are going to say yes, but their eyes are going to light up, you know? If at Time 0 you give them an extremely gameable system that can produce billions of dollars of profit, at Time 10 your system is going to be a smoking wreckage and they are going to have billions of dollars of profit. That’s their whole job, you know? I couldn’t tell you in advance what all the intermediate steps will be, and in fact in hindsight I cannot tell you what the intermediate steps actually were, how Jump and Jane Street made money off the collapse of Terra. But as a heuristic, I mean, come on. Terra was like “hello we have a balloon full of money, here is a pin, dooooooon’t pop the balloon.” Guess what!"
It's like with Madoff; the billions weren't lost when it collapsed, the billions were already gone (or never existed).
Like, if I make a company with ten billion shares, and then put shares for sale at $5 a piece, and you buy one, then my company would also have a $50bn valuation, by the same logic that Terra / Luna had a $50bn valuation.
https://en.wikipedia.org/wiki/Terra_(blockchain)
> The Anchor Protocol was a lending and borrowing protocol built on the Terra chain. Investors who deposited UST in the Anchor Protocol were receiving a 19.45% yield paid out from Terra's reserves.
What the fuck?
How do you create a stablecoin? There are two ways in general. One is to have it backed 1:1 with a bank account somewhere that contains the actual currency it represents. In theory you then allow people to freely exchange back and forth between tokens and dollars. Tether kinda/sort works this way in theory.
The other way is to play games with algorithms and try to use the market against itself to create stability. Terra (UST) attempted to do this by running a complex scheme that leveraged a floating backing token, Luna, and a smart contract which allowed you to exchange 1 UST for $1 worth of newly created Luna. If UST starts to lose its peg and become worth less than a dollar, people buy it to exchange for $1 worth of Luna, sell the Luna for a profit, so arbitrage sorts the price out. If it becomes worth more than a dollar, you buy Luna, burn it to convert to new UST, then sell that for a profit, adding sell pressure and diluting the supply.
Even with the best will in the world systems like this could best be described as meta-stable, i.e. it'll smooth out minor perturbations but there are limits.
One major problem is how do you get Luna to be worth anything though? Well you offer inducements like a ridiculous interest rate, high enough that anyone outside the cryptocurrency bubble would immediately see a red flag, and which then has to be subsidised by ... creating more tokens.
Eventually the limit was discovered, Luna dumped massively and the whole illusion collapsed.
I personally don't understand how any of this works.
The company in charge of a crypto thing made a sudden (and I assume unexpected) withdraw of $150 million.
Jane Street, who worked with them, dumped $80 million within 10 minutes.
Are we supposed to think Jane Street wasn’t supposed to be monitoring what was going on? If I was working with a bunch of crypto people who suddenly took out a ton of money without warning me, I can absolutely see wanting to pull my money before everything collapses. Crypto is volatile.
As other people pointed out, this is 10 MINUTES. You don’t need secret information to notice something happening that fast. You need dial-up. That would be plenty fast enough.
Sure if you can actually produce records where someone from TerraLabs said “we are running away, pull out quick“ fine. But even then… if they waited most of 10 minutes did they even need that information? It’s not like rug pulls are an unknown thing in crypto.
I get the lawyer wants to help his clients but unless he gets some discovery and finds something pretty damning I’m not sure there’s anything here. I was expecting to see one of those allegations where they did it within like two seconds. I can see two seconds being collusion.