Terraform Labs Alleges Insider Trading by Jane Street Using 'Secret Telegram': Circumstances of $192 Million Profit During 2022 UST Collapse

Legal battles reopening the wounds of the 2022 TerraUSD (UST) collapse are heating up. Terraform Labs recently intensified its offensive, alleging that major trading firm Jane Street front-ran the market through a secret Telegram group.

According to court documents released as of May 21, 2026, a developer who was a former intern served as a bridge for conveying inside information. Specific circumstances have emerged showing that Jane Street reaped massive profits during the apocalyptic 'death spiral' of the UST ecosystem.

The federal lawsuit (Case No. 1:26-cv-01504) filed by Todd Snyder, the bankruptcy administrator for Terraform Labs, identifies Jane Street system developer Bryce Pratt as a key figure. Pratt is accused of using his past connection as an intern at Terraform to maintain a secret communication channel with Terraform insiders and obtain material non-public information in real-time.

Pratt and Terraform's head of research had an explicit understanding to keep their conversations confidential, and Pratt added a request to 'don't share pls' while sending information via Telegram.

This secret channel was used as a conduit for conveying Terraform's response strategies and the health status of UST, which were not disclosed to the market, beyond just maintaining a friendship. The lawsuit states that Jane Street modified its trading strategy based on this non-public information and accelerated the market collapse by taking aggressive short positions at the critical moment when UST's peg broke.

Timeline and Manipulation Allegations During the May 2022 Crash

According to the lawsuit, Jane Street's actions began in earnest on May 7, 2022. Initially attempting to exit a bad trading position, Jane Street abruptly changed its stance on May 8 after obtaining non-public information regarding the stability of UST. They executed trades in a direction that induced further crashes by utilizing sensitive information, such as the details of Terraform's bailout negotiations.

• May 7, 2022: Jane Street began withdrawing from the market through an initial $85 million UST swap.
• After May 8, 2022: Focused on attacking the vulnerabilities of UST and LUNA based on non-public information obtained through a secret Telegram group.
• Result: Jane Street is estimated to have made a profit of approximately $192 million, which led to the evaporation of $40 billion in market value.

The $192 million profit Jane Street reportedly earned stands in stark contrast to the $40 billion loss the entire market suffered at the time. Terraform criticized Jane Street as not merely a lucky trader, but a predatory actor who used inside information to maximize market fear and accelerate the collapse for their own profit.

Jane Street strongly refuted these allegations and filed a motion to dismiss in court in April 2026. A company spokesperson characterized the lawsuit as a 'transparent extortion attempt' to shift losses caused by the multi-billion dollar fraud of Terraform Labs management onto a third party. They emphasized that Terraform had already admitted to fraud charges in a lawsuit with the SEC and agreed to pay a $4.47 billion fine, arguing that all responsibility lies with Terraform management.

Case No. 1:26-cv-01504, at the center of the legal battle, is being led by Terraform's bankruptcy trustee as part of a broad effort to recover assets for the bankruptcy estate. As of May 2026, the court is holding hearings on Jane Street's motion to dismiss, and the legal community is watching to see if this case will set a new precedent regarding the use of inside information by institutional investors.

This case complicates the existing narrative that limited the responsibility for the Terra incident solely to the internal failures of Terraform Labs. If the allegations against Jane Street are proven true, it is expected that calls for regulation regarding moral hazard and market manipulation by large institutional investors in the cryptocurrency market will grow louder.

The key to the future trial depends on whether the lawsuit can enter the discovery phase. If the court denies the motion to dismiss and allows a full investigation, undeleted Telegram logs and additional internal communication records could be revealed to the world, bringing us one step closer to the truth of May 2022.