The cryptocurrency crash that evaporated 40 billion dollars, some people knew the outcome 10 minutes in advance

Written by: Cosmic Wave Naruto, Deep Tide TechFlow

In May 2022, $40 billion evaporated in 72 hours.

That was the most brutal crash in cryptocurrency history. UST, once hailed as the "crown of algorithmic stablecoins," plummeted from $1 to worthless in just a few days; Luna, which had a market cap of nearly $40 billion, fell from a high of $116 to nearly zero.

Millions of ordinary investors lost their savings that early summer, refreshing their screens and staring at the continuously plummeting candlestick chart, not knowing what was happening or what to do.

The official explanation came quickly: flawed algorithm design, Do Kwon lied, and the market naturally died. Most people accepted this answer, categorizing the disaster as "another lesson from the crypto world," and then moved on.

This answer held for nearly four years.

Until February 23, 2026, when Todd Snyder, the bankruptcy liquidator for Terraform Labs, submitted a lawsuit to the Manhattan federal court. The world's most mysterious and profitable quantitative trading giant, Jane Street, was thrust into the spotlight.

The question that had been silent for four years finally had a new version of an answer.

The Secret Group Chat of Jane Street and LUNA

To understand the weight of these accusations, one must first know who the defendants are.

For most crypto users, Jane Street may be a strange name. But on Wall Street, it is legendary, a firm that deliberately maintains a low profile while quietly becoming one of the most important players in the global financial market.

Between 1999 and 2000, three former Susquehanna traders, Tim Reynolds, Robert Granieri, and Michael Jenkins, along with IBM developer Marc Gerstein, founded Jane Street in a small windowless office in New York. Initially, they engaged in ADR arbitrage, which was unremarkable and went unnoticed. But they later focused on a niche market of ETFs and made it their core battleground.

This bet changed everything.

Today, Jane Street is one of the largest market makers in the world, operating simultaneously in 45 countries and over 200 trading venues, controlling about 24% of the primary market for U.S.-listed ETFs, with a monthly equity trading volume of up to $2 trillion. In 2024, its net trading income reached $20.5 billion, surpassing Bank of America and rivaling Goldman Sachs. In the second quarter of 2025, its quarterly net trading income soared to $10.1 billion, with a net profit of $6.9 billion, breaking all major Wall Street investment banks' quarterly records.

With 3,000 employees, no CEO, and no traditional hierarchy, all employees share compensation based on the overall profits of the company. Jane Street describes itself as "a collection of puzzle solvers," while outsiders refer to it as an "anarchist commune," flat, mysterious, and almost completely closed off to the media.

Among its alumni is a well-known figure, SBF, who joined Jane Street after graduating from MIT in 2014, honing his trading instincts for three years before leaving in 2017 to establish Alameda Research and FTX. The people cultivated by this company profoundly changed the landscape of the crypto world, in every sense of the word.

Now, this company, known for being "low-key, precise, and always on the side of information advantage," finds itself in the defendant's seat.

At the core of the accusations is a private group chat called "Bryce's Secret."

The creator is Jane Street employee Bryce Pratt. He was once an intern at Terraform and, after leaving, joined Jane Street, but his old connections remained intact, with doors open on both sides.

In February 2022, Pratt pulled his former colleagues into this private channel, establishing a communication pipeline connecting Terraform insiders with Jane Street, with Terraform's software engineers and business development heads on the other end. The lawsuit alleges that through this pipeline, Jane Street learned in advance about Terraform's quiet plan to withdraw from the Curve liquidity pool, a decision that had not yet been made public.

On May 7 at 5:44 PM, just 10 minutes after Terraform Labs quietly withdrew $150 million in UST from Curve's 3pool, a wallet alleged to be associated with Jane Street followed suit, withdrawing $85 million in UST, marking the largest single transaction in the pool's history.

By May 9, UST had already dropped to $0.80, and signs of a crash were undeniable. At this time, Pratt messaged Do Kwon and the Terraform team through the group chat, indicating that Jane Street could consider "buying Luna at a significant discount."

While harvesting retail investors, they were also preparing to pick up the pieces in the fire.

The defendants named in the lawsuit, besides Pratt, include Jane Street co-founder Robert Granieri, the only one of the four founders still in office, and employee Michael Huang. The lawsuit cites the Commodity Exchange Act and the Securities Exchange Act, while also alleging fraud and unjust enrichment, demanding a jury trial for damages and the disgorgement of profits.

Bloomberg cited a core statement from the lawsuit: Jane Street's operations allowed it to "liquidate hundreds of millions of dollars in potential risk exposure at the right moment, just hours before the collapse of the Terraform ecosystem."

Jump Trading and a Deeper Darkness

The lawsuit against Jane Street is not an isolated incident. Two months prior, the same liquidator Todd Snyder had already filed a lawsuit in the federal court of Illinois against Jump Trading and its co-founder William DiSomma, as well as former Jump Crypto president Kanav Kariya, seeking $4 billion in damages.

The story of Jump is, in some ways, even more shocking than that of Jane Street.

The lawsuit reveals a picture that had never been fully pieced together before: as early as May 2021, when UST first faced a de-pegging crisis, Jump secretly bought about $20 million in UST to stabilize the price back to $1.

Later, the public believed the packaged story of the algorithmic stablecoin, thinking the algorithm worked and the system was self-healing. Terraform thus avoided regulatory scrutiny, while Jump, in exchange, acquired over 61 million Luna tokens at a price of $0.40 each, when the market price was around $90, a discount of over 99%. Jump later sold this batch of tokens, reportedly making a profit of about $1.28 billion.

During the final collapse in May 2022, Luna Foundation Guard transferred nearly 50,000 bitcoins (about $1.5 billion) to Jump without a written agreement, ostensibly for market support. The ultimate fate of the bitcoins remains unconfirmed, with the lawsuit stating: "It is unclear whether Jump further enriched itself through this."

Notably, DiSomma and Kariya invoked the Fifth Amendment hundreds of times during previous SEC inquiries to refuse to answer. Jump's subsidiary Tai Mo Shan settled with the SEC in 2024 for $123 million, admitting to "misleading investors." Kariya himself resigned from his position as president of Jump Crypto that same year, citing an investigation by the CFTC.

More critically, according to the statements in the Jane Street lawsuit, it was through Jump's information channels that Jane Street obtained some "non-public key information." The two cases are connected by an invisible thread.

But there is another half to this story.

Jane Street's response was direct: this is a "desperate lawsuit," a "transparent attempt to extract money from the company." They added that the losses of Terra and Luna investors stem from the "billions of dollars in fraud" created by Do Kwon and the Terraform management, which they will vigorously counter.

This statement is not incorrect. Do Kwon has admitted to fraud and was sentenced to 15 years in prison; Terraform also paid a fine of $4.47 billion. The death spiral of Luna was predetermined by its design: algorithmic stablecoins are essentially a system that requires continuous buying and confidence to maintain; once panic is triggered, the arbitrage mechanism operates in reverse, leading to self-destruction at an exponential rate.

But "Do Kwon is guilty" and "others are innocent" do not mutually establish each other.

It is a fact that a building has a fatal structural flaw. During its collapse, whether anyone secretly removed the most valuable items before the firefighters arrived is another independent legal and moral issue.

There is another detail worth noting. On the very day the Jane Street lawsuit was exposed, on-chain tracking researcher ZachXBT announced that he would release "a major investigation into one of the most profitable institutions in the crypto industry on February 26, 2026, involving multiple employees who have long used internal data for insider trading." He did not name names. But the timing's subtlety made the entire crypto Twitter hold its breath in anticipation.

This story is not over. But one thing can be confirmed: in the crypto market that claims to be "decentralized," true inequality has never disappeared; it has merely shifted from the bank's trading desk to the back of smart contracts on the blockchain, continuing to exist in a more concealed form.

The Luna incident may have been the most intense tear in that fissure, while those standing on the other side of the crack had already safely evacuated before the wall fell.

"The gentry's money is returned in full, while the common people's money is split three to seven," as the movie goes, so it is in the crypto world.