Jane Street Under Fire: From India’s Market Ban to a $40 Billion Crypto Conspiracy

Jane Street Capital, one of the most powerful quantitative trading firms in global markets, is facing mounting legal and regulatory pressure on two continents. Within days of being sued in the United States over the $40 billion collapse of the Terra Luna crypto ecosystem, speculation spread online that the firm had wiped its presence from social media platform X. The rumours proved unfounded, as the account had never posted content. Yet the speculation reflected a wider sense of unease in digital asset markets.

The New York based trading house generated $20.5 billion in net trading revenue last year and accounts for roughly one tenth of all United States equity trading volume. Its influence extends deep into exchange traded funds, derivatives and crypto markets. Now, however, it faces serious allegations in both the United States and India, raising questions about how far aggressive trading strategies can stretch within existing rules.

The Terraform Lawsuit

On 23 February, a lawsuit was filed in the Southern District of New York by Todd Snyder, the plan administrator overseeing the bankruptcy wind down of Terraform Labs. The complaint names Jane Street Group, Jane Street Capital, co founder Robert Granieri and two employees, Bryce Pratt and Michael Huang.

The central allegation is that Jane Street used confidential information obtained from Terraform Labs to avoid more than $200 million in losses before the Terra ecosystem collapsed in May 2022. The firm has rejected the lawsuit, describing it as a desperate attempt to extract money.

According to the filing, a flow of material non public information moved from Terraform‘s engineering team to Jane Street’s trading desk. Pratt, who had interned at Terraform during the summer of 2021 before joining Jane Street later that year, allegedly maintained contact with Terraform staff. By early 2022 he had created a private group chat that included a Terraform software engineer and members of the companys business development team.

Messages cited in the complaint suggest that Terraform employees believed Jane Street was aware of key market moves in advance. When concerns were raised about the legality of certain actions, Pratt allegedly indicated that if similar conduct by other trading firms was lawful, Jane Street would likely operate within those boundaries as well.

The lawsuit focuses on events of 7 May 2022. On that day, Terraform withdrew 150 million units of its stablecoin UST from Curve3pool, a decentralised exchange, as part of a liquidity migration that had not been publicly disclosed. Within minutes, a wallet linked to Jane Street withdrew 85 million UST from the same pool, reportedly the largest single swap in the platforms history.

The combined withdrawals destabilised liquidity. Within days, the Terra Luna ecosystem collapsed, erasing approximately $40 billion in market value. The complaint argues that Jane Street‘s trade could not have occurred without advance knowledge of Terraform’s plans.

Jane Street disputes that characterisation. It maintains that the collapse resulted from large scale fraud committed by Terraforms management. Terraform founder Do Kwon was sentenced in December 2025 to 15 years in prison for wire fraud and conspiracy. A separate lawsuit filed in December 2025 accuses Jump Trading of entering into a secret arrangement to purchase Luna tokens at $0.40 when the market price was $110.

Much of the Terraform complaint remains redacted. Specific trading data, communications and profit figures are under seal. The case includes 13 counts, ranging from insider trading and securities fraud to violations of the Commodity Exchange Act and breach of confidence.

Regulatory Action in India

While the allegations in New York remain unproven, regulators in India have already taken action against Jane Street entities.

In July 2025, the Securities and Exchange Board of India issued a 105 page interim order against four Jane Street related entities: JSI Investments, JSI2 Investments, Jane Street Singapore and Jane Street Asia Trading. The order barred them from Indian securities markets.

SEBI accused the firm of manipulating the BANKNIFTY and NIFTY 50 indices across 18 derivatives expiry days between January 2023 and March 2025. The regulator calculated total profits of 36,502 crore rupees, equivalent to roughly $4.3 billion.

According to the order, Jane Street followed what SEBI described as an expiry day trap. In morning sessions, its entities allegedly bought large volumes of index stocks and futures, sometimes accounting for more than 20 per cent of market volume in individual securities. This activity pushed the index higher. Later in the day, those positions were reversed, leading the index to fall. Short options positions established earlier then became profitable as prices declined.

SEBI characterised the trades as sharp, large and aggressive, creating a misleading appearance of genuine market activity. When Indias National Stock Exchange issued a written warning in February 2025 instructing the firm to stop, SEBI stated that Jane Street acknowledged the letter but continued its trading patterns. The regulator described this as egregious conduct in clear disregard of its advisory.

Jane Street has dismissed the investigation as biased and pre determined. It has appealed to Indias Securities Appellate Tribunal. The hearing was adjourned on 25 February 2026, the same week the Terraform lawsuit was filed in New York. SEBI has impounded 4,843.57 crore rupees, around $566 million, in alleged unlawful gains.

A Common Structure

The legal theories in the two cases differ. In the United States, the claim centres on insider trading through misuse of confidential information. In India, the regulator alleges market manipulation through trading patterns designed to influence index levels.

Yet both cases describe a similar structural approach. In each, Jane Street is alleged to have used a position of advantage, whether informational or market based, to move one layer of the market and profit in another, particularly in derivatives.

This pattern matters because of Jane Street‘s central role in modern financial infrastructure. The firm was one of the original authorised participants for BlackRock’s iShares Bitcoin Trust, the largest spot Bitcoin exchange traded fund, and remains one of the approved participants for in kind share creation and redemption. Its most recent regulatory filing showed approximately $790 million in shares of the fund at the end of the fourth quarter of 2025.

However, current disclosure rules require reporting of long equity positions but not futures, swaps or many over the counter derivatives. As a result, Jane Streets true net exposure to Bitcoin remains unclear. The United States Securities and Exchange Commission has proposed broader disclosure requirements that would include certain cash settled derivatives, though these changes have not yet been implemented.

What Lies Ahead

Both proceedings are at an early stage. The Terraform lawsuit has only recently been filed. The Indian appeal remains pending. Jane Street denies wrongdoing in both jurisdictions.

Still, the firm now finds itself under scrutiny in two major markets. Regulators and plaintiffs have raised concerns that trading strategies built on speed, scale and information advantages may be stretching the limits of existing oversight frameworks.

For a firm that plays a critical role in global equity, derivatives and crypto markets, the stakes are significant. Beyond potential fines or damages, the outcome of these cases may influence how regulators view the balance between liquidity provision and market power in increasingly complex financial systems.