Jane Street Questions Ongoing Upgrade: Bitcoin's "10 Point Plunge" Disappears After Lawsuit

BlockBeats News, February 26: According to WSJ, on February 24, the court-appointed bankruptcy trustee of Terraform Labs filed a lawsuit in the New York federal court against Jane Street, accusing it of conducting frontrunning trades using non-public insider information provided by Terra insiders during the Terra crash to profit from it. The complaint shows that Jane Street established a secret communication channel with Terraform Labs' internal staff through former intern Bryce Pratt to obtain non-public confidential information. On May 7, 2022, Terraform Labs withdrew 1.5 billion TerraUSD (UST) from the Curve liquidity pool without prior disclosure of intent. Within less than 10 minutes, Jane Street followed the withdrawal with around 85 million UST through an associated wallet, completing a "frontrun" trade before the market-wide panic and full UST depegging, illegally profiting and accelerating the collapse of Terraform Labs and the Terra ecosystem.

A spokesperson for Jane Street responded to the accusations from the Terraform Labs bankruptcy trustee, stating that the lawsuit is an attempt to extort money from Jane Street. Jane Street will vigorously defend its rights against "baseless, opportunistic allegations." In addition to the Terraform lawsuit, Jane Street was previously accused of market manipulation in India last year, with about 4.843 billion rupees (approximately $565 million) in assets frozen and trading in the Indian securities market banned. There are also rumors that Chinese regulatory authorities are reviewing Jane Street's behavior in the Chinese ETF market.

The crypto community has noted that since the lawsuit against Jane Street, the daily "10:00 Crash" in Bitcoin (Eastern Time) has suddenly disappeared, with Bitcoin rising by 10%, increasing its market value by approximately $120 billion, and the BTC weekly chart turning green for the first time after five consecutive red candles. Concurrently, the overall cryptocurrency market capitalization has also increased by nearly $200 billion. Bloomberg ETF analyst Eric Balchunas said, "The 'threat' is gone, and that's the vibe you're feeling today in CT and price action. I get that the big intraday down moves before almost wrecked every bounce and crushed confidence. But simply taking it out, is that enough to sustain a bounce? We'll see."

Market speculation surrounding Jane Street has once again sparked discussions about the trading mechanism of a Bitcoin spot ETF. Analysts point out that the creation and redemption of shares in a spot ETF can be completed by authorized participants (APs) under a regulatory exemptive framework, not necessarily requiring immediate Bitcoin trading on the open market. In scenarios like futures contango, APs may also hedge and offset through futures and other derivatives, leading to a time lag between ETF fund inflows and spot buying, and short-term price performance.

As a global top quantitative trading giant, Jane Street has a very extensive layout in the cryptocurrency field, mainly focusing on infrastructure, DeFi, and crypto mining. Public information shows that cryptocurrency native projects in which Jane Street has invested include: ZetaChain, Arbitrum, 1inch, Euler Finance, Membrane Labs, Kaito, Vest Exchange, etc.

On the equity side, between 2024 and 2026, Jane Street significantly increased its holdings in several crypto mining companies through the secondary market, including: holding approximately 5.4% of Bitfarms (BITF); holding approximately 5% of Cipher Mining (CIFR); holding approximately 5% of Hut 8 (HUT). Furthermore, Jane Street participated in multiple rounds of Kraken financing last year. Jane Street is also one of Coinbase's main liquidity providers and stockholders.