Author: Max.s
The crypto market at the end of February 2026 was shrouded in a strange "coincidence." For the past few months, the Bitcoin market had frequently experienced a precise sell-off around 10 AM Eastern Time, a phenomenon jokingly referred to as the "Jane Street 10 AM Dump Strategy." However, this week, with a lawsuit filed in New York federal court, this seemingly mechanically precise selling pressure suddenly vanished, and Bitcoin and a host of altcoins surged in response.
This is not an urban legend, but a real vortex currently facing Jane Street, a top cryptocurrency giant on Wall Street. As one of the world's most secretive and profitable trading firms, Jane Street not only faces a hefty fine last year for alleged manipulation in the Indian derivatives market, but is now also embroiled in the old scandal of the 2022 TerraUSD (UST) crash. Todd Snyder, the bankruptcy liquidator of Terraform Labs, has officially filed a lawsuit against the company, accusing it of using insider information to engage in front-running trades, accelerating the destruction of what was once a $40 billion cryptocurrency empire.
When "justice delayed" strikes precisely after a four-year cycle, and when quantitative giants in traditional finance leave indelible on-chain evidence of their crimes in the decentralized world, we are forced to re-examine a core issue: Is the "black box operation" on which centralized giants like Jane Street, which straddle both traditional and crypto sectors, the engine of market liquidity or a deadly amplifier of systemic risk?
To understand the destructive power of this lawsuit, we need to turn back the clock to May 7, 2022—the point that triggered a major earthquake in the crypto industry.
In the mechanism design of the algorithmic stablecoin UST, the Curve pool (especially Curve 3pool) is the core liquidity reservoir that maintains its peg to the US dollar. According to court documents disclosed by the bankruptcy liquidator, Terraform Labs quietly withdrew 150 million UST from the Curve pool that day without any public announcement. For an algorithmic stablecoin that highly relies on confidence and liquidity depth, such a large-scale withdrawal is undoubtedly extremely dangerous.
Shockingly, just 10 minutes later, a wallet address allegedly linked to Jane Street withdrew 85 million UST from the same pool. Under the AMM (Automated Market Maker) mechanism, extreme skewness in the pool's assets can trigger exponential slippage. Jane Street's withdrawal of 85 million UST was like detonating a targeted bomb on an already cracked dam, directly causing a liquidity crunch for UST and initiating the subsequent "death spiral."
This crucial 10-minute time difference became irrefutable evidence for the liquidators' accusations of "insider trading." The lawsuit revealed a behind-the-scenes network known as "Bryce's Secret." Jane Street was accused of deliberately assigning Bryce Pratt, a former intern at Terraform Labs, to reconnect with Terraform's software engineers and business development executives using personal connections. This private chat group of former colleagues effectively became a "backdoor" for leaking crucial Terraform secrets to Wall Street giants.
Moreover, the liquidators had already laid the groundwork in a previous lawsuit against another quantitative giant, Jump Trading, for a staggering $4 billion. The latest complaint further alleges that some non-public information about Terraform Labs was leaked to Jane Street through Jump Trading. This clandestine communication among Wall Street's top market makers during the crisis has completely exposed retail investors to a meat grinder of extreme information asymmetry.
Despite Jane Street's strong denials, calling it a "desperate and transparent extortion" and attributing the losses to a multi-billion dollar fraud by Do Kwon and Terraform management, the quantitative giant's past "lower-dimensional attack" is facing unprecedented legal backlash in the face of the immutable on-chain timestamps and recovered chat logs.
The Jane Street case has sparked a deeper industry reflection: Is the opaque operation of centralized giants exacerbating the systemic risks of crypto assets?
In traditional financial markets, Jane Street is known for its extremely low profile and astonishing profitability. They rely on sophisticated mathematical models, high-frequency trading (HFT), and extremely low-latency hardware to capture profits from tiny price spreads. When such institutions made a large-scale entry into the crypto market around 2020, the industry naively believed that they would bring much-needed liquidity and pricing efficiency.
However, it has become clear that the profit-seeking nature of capital is more easily distorted into predatory trading in the unregulated crypto world. The depth of the crypto market is still orders of magnitude less than that of the US stock market. When a fund of Jane Street's size, coupled with its algorithmic trading engine, intervenes, they are not merely price takers, but price creators.
Take the "10 AM sell-off strategy" that has been widely discussed in the market recently as an example. Due to the operating mechanism of spot Bitcoin ETFs (such as BlackRock's IBIT), market makers need to align their subscriptions and redemptions with the net asset value (NAV) at specific times.
Some analysts point out that by leveraging their massive holdings and algorithms, these giants can artificially create panic selling during periods of relatively low liquidity, triggering liquidation of leveraged long positions held by retail investors, and then accumulating shares at even lower prices. While this strategy is often subject to strict scrutiny by the US SEC in traditional markets, its boundaries remain blurred in the cryptocurrency spot market.
The Terra incident vividly demonstrated the power of this "black-box algorithm + information asymmetry." While market makers did provide liquidity when the system was in a steady state, their algorithms instantly betrayed them when tail risks emerged (such as a slight de-anchoring of UST). Leveraging insider information or millisecond-level advance awareness of on-chain data, they not only failed to provide a buffer but also became the first to short sell or withdraw funds. This "lending an umbrella on a sunny day and removing it on a rainy day" behavior, through their massive capital, rapidly amplified a localized liquidity crisis into a systemic collapse.
If we broaden our perspective, we will find that Jane Street's style of operation in the crypto market is not an isolated case, but rather an extension of its inherent trading logic.
In July 2025, the Securities and Exchange Commission of India (SEBI) fined Jane Street a staggering 48.44 billion rupees (approximately $580 million) and imposed a trading ban. SEBI's investigation revealed that Jane Street engaged in "short, large, and highly aggressive" intervention in the spot, futures, and options markets on 18 options settlement dates (including Bank Nifty and Nifty 50). They used their financial advantage to manipulate index levels at key settlement dates, thereby generating huge profits for their options positions.
Whether in India's traditional derivatives market or Terra's on-chain liquidity pools, we see the same behavioral logic: finding vulnerabilities in the market structure (liquidity vacuums on option expiration dates, imbalances in algorithmic stablecoin funding pools), and then using massive amounts of capital and millisecond-level execution speed to carry out "highly aggressive" interventions.
The difference lies in the fact that traditional financial markets have mature regulatory bodies (such as SEBI) that conduct ex-post, thorough reviews; while in the crypto market of 2022, giants mistakenly believed that a decentralized facade could cover everything.
It's now 2026, nearly four years since the Terra crash, and Do Kwon was sentenced to 15 years in prison at the end of last year. Why is it that more than three years later, the liquidation of market makers is only just reaching its peak?
This reflects a new characteristic of the crypto industry as it enters deeper waters: cross-cycle accountability. In the past, the rapid cycles of the crypto market led many perpetrators to believe that as long as they weathered the bear market, their past misdeeds would be covered up by the prosperity of the next bull market. However, the Terra bankruptcy administration team's relentless pursuit demonstrates that the dual weapon of combining traditional bankruptcy liquidation procedures (subpoena rights, access to communication records) with the transparency of blockchain data (on-chain tracking) is completely shattering this侥幸心理 (a sense of侥幸, or a belief that one can get away with something).
Jane Street's entanglement in the Terra scandal is not only a legal battle involving billions of dollars in compensation, but also a landmark event in the history of crypto finance. It has torn away the elegant and mysterious veil of Wall Street quantitative giants in the decentralized world, exposing their true nature of turning their computing power and financial advantages into ruthless tools of plunder in the absence of regulatory constraints.
This "witch hunt" in the crypto core is by no means excessive regulation, but rather a necessary growing pain as the crypto market matures. It brutally declares to all institutional participants that while blockchain may have no borders, every timestamp on the chain will be indelible evidence in court.
For market makers, the era of reckless, blind expansion is over. In future market competition, compliance will no longer be a dispensable moat, but a crucial bottom line for survival.
