Crypto’s most infamous collapse is back in the spotlight, and this time the blast radius reaches deep into Wall Street. A new lawsuit doesn’t just revisit Jane Street sued for alleged insider trading…
Jane Street has called the lawsuit a “desperate” and “baseless” attempt to extract money, with a spokesman stating that losses suffered by Terra and Luna holders were the result of a “multibillion-dollar fraud” perpetrated by Terraform’s own management.
It is a reasonable deflection on its face. Do Kwon did commit fraud. He pleaded guilty and was sentenced to 15 years in a U.S. prison. Terraform also agreed to pay the $4.47 billion in penalties. But Terraform’s guilt does not automatically excuse profiting from insider knowledge of its collapse. Both things can be true.
This lawsuit does not stand alone. Last December, Snyder sued Jump Trading and its top executives (co-founder William DiSomma and former Jump Crypto president Kanav Kariya), claiming Jump “actively exploited” the Terraform ecosystem through a backdoor deal to inflate the value of TerraUSD before it imploded, seeking $4 billion in damages (plus other relief) under fraud, manipulation, and fraudulent transfer claims. Snyder alleges Jump was also involved in circulating confidential information to Jane Street. Jump has denied the claims.
These are not isolated; they are part of Snyder’s broader efforts to recover assets for Terraform creditors and victims.
What is taking shape is a picture of Wall Street’s most sophisticated trading firms sitting at the center of crypto’s worst disaster. Not just as bystanders, but as alleged participants with a front-row seat and advance notice.
Legal experts note that insider trading claims in crypto are complex, since courts must decide what counts as securities and what constitutes material non-public information in token markets. If the claims proceed, Jane Street may need to disclose internal communications and trading data tied to TerraUSD, a discovery process that could expose how major market makers manage risk when protocols begin to fail.
The message? It’s becoming clear to the broader crypto market that the firms that claimed to be providing liquidity may have been extracting it. That question now belongs to a federal judge.
According to reports, Jane Street desks were given an urgent memo to immediately cease “manipulative Bitcoin trading activity” — with algos reportedly shut down. This is not confirmed, but it is trending on X.
Author: Richardson Chinonyerem
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
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Comments
Is there an article about this written by a human? The “it’s not X. It’s Y” is too distracting.
For me it's the constant feel of everything being "exciting" while no real information is actually conveyed. It's a common tactic of both AI and clickbaity articles. There's no hard evidence here, just hearsay. Nothing really to report until there's more information. I don't want drama in reporting, I want facts. But I guess I'm an outlier which is how we got both this AI style and the clickbait it was trained on...
It also doesn't help that all the title graphics have the same dramatic feeling and are certainly AI generated.
> For me it's the constant feel of everything being "exciting" while no real information is actually conveyed. It's a common tactic of both AI and clickbaity articles.
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.
By whatshisface 2026-02-2615:331 reply Here's why no LLM rules make sense:
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.
By elcritch 2026-02-2812:27 > 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.
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.
By godelski 2026-02-2619:29 I've had a similar complaint about publishing in machine learning conferences. They're putting in these "no LLM" rules but those are just idiotic. Proving LLM usage is really really difficult, but (one of) the underlying problem has always been bad reviews, or low quality reviews. So why write a LLM rule? Why not tackle the problem more directly?
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.
By consumer451 2026-02-261:582 reply Waiting for the only human I trust in this space to report on this:
You could also check Matt Levine from Money Stuff - Bloomberg. He is quite known on HN. The way he writes plus his great knowledge with no BS makes him my favorite (and only) journalist I follow.
Edit: actually someone already found his article and posted it: https://news.ycombinator.com/item?id=47160848
By consumer451 2026-02-264:04 Thanks, but the link to the journalist I shared has been threatened multiple times, and yet she kept trucking through. I rarely say "avoid MSM," but in this case, in 2026, I would personally recommend avoiding your MSM recommendation.
No hard feelings.
By ChrisMarshallNY 2026-02-262:121 reply +1 on that. Thanks!
I'm sure she'll be right on it...
By consumer451 2026-02-262:30 She's far braver than most of us. I self-censor all the time on this website.
Havel's greengrocer, placing the sign.
Carney at Davos, his eyes uncovered.
Matt Levine has a take: https://www.bloomberg.com/opinion/newsletters/2026-02-24/ai-...
> 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!
How about a non-paywalled link? archive.is seems to be having issues today.
I have the newsletter in email and there wasn't much more than what was posted above, other than quoting from this article:
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.
By seanhunter 2026-02-269:001 reply “Can’t complain” doesn’t make it legal. I had this argument a number of times with cryptobros at the time “if it’s on the chain it’s fair game” I heard quite often. Just, no. Just because some code allows you to get away with something doesn’t make it not illegal[1].
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.
By bb88 2026-02-2617:23 > I had this argument a number of times with cryptobros at the time “if it’s on the chain it’s fair game” I heard quite often. Just, no. Just because some code allows you to get away with something doesn’t make it not illegal[1]
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!
This this this so much. Thanks for pointing it out.
> Ten minutes is not a coincidence. It is a trade.
By zahlman 2026-02-262:21 Wow, that's... considerably worse than typical output nowadays.
By jlund-molfese 2026-02-261:59 https://www.wsj.com/finance/currencies/jane-street-accused-o... is a pretty normal one
By manoDev 2026-02-263:39 “It’s not about human writing. It’s about the message.”
AI is turning the entire web into LinkedIn itisnotaboutism.
The negative parallelism pattern is broader than the literal phrasing "not X, but Y". Here are some examples from the article:
- "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..."
By energy123 2026-02-263:29 Math papers using LLMs: It's not true, it's false
Thanks. I probably didn't notice them because they don't seem at all unnatural.
Not seeming unnatural is literally what the LLM is trained to be, but it's pretty interesting how little sense they make when you dig in. Goes to how little attention we pay normally, and/or how much weight we put on text seeming natural.
"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.
By duskwuff 2026-02-268:39 > Not seeming unnatural is literally what the LLM is trained to be, but it's pretty interesting how little sense they make when you dig in.
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.
By cynicalkane 2026-02-262:52 The awful graphic at the top is certainly not made by a human.
Didn't many of the FTX cronies come from Jane Street?
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.
By mcmcmc 2026-02-263:23 Jane Street was also banned from trading in India because they couldn’t stop manipulating the market
What do you want? Regulated or unregulated securities?
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!
By StopDisinfo910 2026-02-2612:511 reply That's not how this works. Unregulated markets are not a free for all. Law still apply in the absence of a regulator.
Also, unrelated minor pet peeve, but what's the deal with the "not ai emdash"? You can just use dash or comma, you know.
By bb88 2026-02-2620:34 I personally like the emdash -- I've been using for years -- I'm not an AI -- And I will continue to use it in the future with the "(not ai)" annotation. I will fight for the freedom -- for me and for others -- to use the emdash however I please.
I thought "Code is Law". So now crypto bros want to fight this out in TradLaw just like the TradFi institutions do?
By rvz 2026-02-262:47 > 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...
By cindyllm 2026-02-262:42 [dead]
By wuiheerfoj 2026-02-262:002 reply 10mins is a lifetime in capital and crypto markets - I find it hard to believe that trading 10mins after the Terraform Labs swap hit the chain constitutes insider trading.
The claim of artificial price inflation with Jump sounds more questionable but TFA doesn’t seem to put it front and centre
Doesn’t that 10m lag make it seem more like insider training? An automated trade would happen nearly instantly, 10m is plenty of time for insiders to send some texts or make some calls.
By klodolph 2026-02-265:22 Third option, which is that there was a partially automated system with a person in the loop.
By thrwaway55 2026-02-263:37 Especially since it's a public ledger. Anyone with a program watching the chain is going to see it. From there they can exercise whatever trade they want for their gain.
