Jane Street Faces Lawsuit Over Terra Collapse, Shifts to Ethereum

Jane Street, a major market-making firm, faces a federal lawsuit alleging it used inside information during the 2022 TerraUSD (UST) collapse, a move the complaint claims "hastened" the stablecoin's demise [1]. Filed by Terraform Labs' administrator Todd Snyder in Manhattan federal court, the suit centers on an intern-turned-employee and a private chat group called "Bryce's Secret" [1]. The complaint alleges Jane Street accessed nonpublic information about Terraform’s liquidity operations, specifically pointing to a May 7, 2022, incident where Terraform withdrew $150 million in UST from Curve’s 3pool, followed minutes later by a wallet allegedly linked to Jane Street withdrawing or swapping roughly $85 million UST from the same pool before the public knew [1]. Jane Street denies the allegations, calling the suit "desperate" and "baseless" [1].

The lawsuit does not accuse Jane Street of manipulating Bitcoin, but it has fueled speculation among market participants about the firm's role in Bitcoin's price movements, particularly "10 a.m. drops" seen in late 2024 and parts of 2025 [1]. Jane Street is a significant liquidity provider in ETF markets and disclosed a large stake of about 20.3 million shares, valued around $790 million, in BlackRock’s iShares Bitcoin Trust (IBIT) in its Q4 2025 13F filing [1]. However, market structure experts argue that such a position likely represents inventory for market making and is "almost entirely offset" by undisclosed options and futures positions, rather than a directional bet [1].

Ethereum's Institutional Appeal Grows

While Bitcoin spot ETFs have attracted nearly $59 billion since their January 2024 launch, building deep institutional liquidity [2], Ethereum has begun offering institutional yield [2]. In January, Grayscale paid out roughly $9.4 million in staking rewards to holders of its Ethereum Staking ETF, marking the first time a U.S. crypto ETF passed staking rewards to investors [2]. This allows Ethereum staking ETF holders to earn approximately 2–3% annually on top of price exposure, a feature Bitcoin ETFs cannot offer [2]. Bitcoin's market capitalization stands at roughly $1.5 trillion, compared to Ethereum's $255 billion, which contributes to Bitcoin's deeper liquidity and initial appeal for larger investors [2].

The lawsuit against Jane Street, coupled with a July 2025 accusation by India’s securities regulator SEBI of manipulation in the Bank Nifty index by Jane Street-linked entities—which the firm disputes [1]—raises questions about the firm's broader market conduct. The ongoing legal battle and the structural shift in institutional crypto offerings mean market participants are closely watching how these developments shape trust and investment flows in the digital asset space.