Ryan Weeks writes on the uneasy relationship between crypto natives and Wall Street.
One thing about blockchains: they’re immutable. And crypto bros, similarly, do not soon forget. It’s a quality very much on display this week, after Jane Street Group, the quantitative trading firm, wassued for alleged insider trading by the administrator winding up Terraform Labs.
Terraform was the entity behind TerraUSD, the ill-fated stablecoin whose unraveling in 2022 wiped out $40 billion in value and is credited by many for sending the broader crypto market spiraling into a prolonged depression.
Jane Street used “non-public information to front-run trading that hastened the collapse of Terraform,” Todd Snyder, a bankruptcy court-appointed administrator, claimed in a redacted complaint filed Monday in Manhattan federal court. A Jane Street spokesperson called the suit “desperate” and “a transparent attempt to extract money,” in a statement at the time. A spokesperson for Jane Street declined to comment further Thursday.
The merits of the suit are far from clear. The complaint is heavily redacted, and the claims are untested. Bankruptcy administrators often cast wide nets in litigation, hunting for recoveries wherever deep pockets exist. Jane Street is among the most sophisticated trading firms in the world, and trading around a volatile asset isn’t the same as trading on inside information.
But the merits almost don’t matter. Among crypto commentators, the reaction was pure vitriol. Many, no doubt, are still nursing wounds from the market’s last annus horribilis, which began with TerraUSD’s collapse and roughly ended with the implosion of Sam Bankman-Fried’s FTX.
What the suit does land on is a nerve. Bitcoin has almost halved from its October record above $126,000, its worst drawdown since the 2022 collapse that Terraform helped trigger — and the relationship between crypto natives and Wall Street has always been uneasy.
The industry spent the last few years celebrating oncoming institutional adoption — spot ETFs, bank custody, prime brokerage entrants — as validation. But that embrace came with a bargain crypto is now reckoning with: the same firms sophisticated enough to help wrap Bitcoin into regulated products are big enough to influence the trading landscape, from pricing to daily volatility.
Jane Street’s role as an authorized participant in crypto’s most mainstream trade — spot Bitcoin ETFs — makes the optics of the Terraform suit especially uncomfortable. For crypto natives, the complaint fuels a suspicion that never fully went away: that Wall Street didn’t enter crypto in good faith. It entered because volatility is a business model.
In their telling, the 2022 crash, which destroyed retail portfolios and killed at least one stablecoin, was — for the market makers, prime brokers and proprietary trading firms that now underpin crypto’s infrastructure — just another trading opportunity. Not a crisis that set back the progressive cause of building a new financial system. Just a dislocation to be harvested.
That gap — between crypto’s self-image as a progressive movement building the future of finance and Wall Street’s treatment of it as a trading venue — has never fully closed. And every time a suit like this surfaces, even one that may go nowhere, it gets a little wider.
Bitcoin has been cut almost in half since its October high, but the institutional scaffolding built around it hasn’t come down with it.
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