Terra Collapse Lawsuit Puts Jane Street in the Crosshairs

Hi! In today’s edition:

• ⚖️ Terraform estate sues Jane Street over Terra collapse

• 📉 Bitcoin drops below $63,000 as ETF outflows continue

• 🔐 Step Finance winds down after $40 million exploit

Today’s newsletter is brought to you by Adaptive Security!

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Terraform Estate Targets Jane Street in Explosive Terra Collapse Lawsuit

One of the most consequential blowups in crypto history is back in court.

The administrator unwinding Terraform Labs has sued trading powerhouse Jane Street, alleging the firm used inside information to profit as TerraUSD unraveled in May 2022. That collapse erased roughly $40 billion in value, vaporized Luna, and triggered a chain reaction that ultimately helped topple lenders, funds and, months later, FTX.

The complaint focuses on a critical moment. On May 7, 2022, Terraform withdrew 150 million UST from Curve’s 3pool. Minutes later, a wallet that analysts have linked to Jane Street pulled 85 million UST from the same pool, according to the suit. The estate claims Jane Street had advance insight into Terraform’s liquidity decisions through private communications and positioned accordingly as the peg began to crack.

Jane Street strongly denies the allegations, calling the case a desperate attempt to shift blame away from Terraform’s own misconduct. Founder Do Kwon is currently serving a 15-year prison sentence after pleading guilty to criminal charges.

Beyond the money, this case could redefine what insider trading means in crypto. If private chat access to a protocol’s crisis response becomes legal liability, the rules of engagement for market makers may change permanently.

Bitcoin Slips Below $63,000 as Fear Deepens

Bitcoin’s slide continued overnight, briefly touching $62,700 before stabilizing. As of 6:00 am ET, BTC was trading at $63,275, with ether at $1,823. The broader market remains under pressure, down roughly 3.4%, with total crypto market cap hovering near $2.25 trillion.

Sentiment has collapsed. The Fear and Greed Index fell to 5, one of the weakest readings on record. U.S. spot Bitcoin ETFs saw another $203 million in outflows on Monday, extending the longest redemption streak since early 2025. Ether ETFs lost an additional $50 million. Liquidity remains thin and funding rates negative, signaling persistent deleveraging rather than fresh buying.

In a market update report, Wintermute described BTC as trading like a “high beta asset,” moving alongside growth stocks in what it called a broader regime shift. According to the firm, markets are repricing structural forces such as tariffs, deglobalization and AI disruption, while the Fed appears constrained. In that environment, growth and momentum assets are being sold, and crypto is caught on the wrong side of the rotation. Wintermute added that positioning shows protection, not conviction, with basis near multi-month lows and put skew elevated.

Step Finance Shuts Down After $40 Million Exploit

Another casualty of this downturn: Step Finance is winding down.

The Solana based portfolio dashboard said Monday it will cease operations after a $40 million security breach on Jan. 31 drained its treasury and fee wallets. The team said it explored both acquisition offers and outside financing in the weeks that followed, but failed to secure fresh capital.

The shutdown impacts not only Step Finance, but also its subsidiaries, including media outlet SolanaFloor and tokenized equities platform Remora Markets. SolanaFloor will keep its historical archive online but will stop publishing new content. Remora, which Step said was isolated from the exploit, is preparing a redemption process allowing rToken holders to redeem for USDC, with tokens backed 1:1.

Today: DEX in the City

Hosts Katherine Kirkpatrick Bos and Jessi Brooks sit down with Robinhood’s Coy Garrison and Seong Seog Lee to discuss how the platform is approaching crypto strategy, compliance, and market structure. The episode also examines the lawsuit against Jane Street, AI models that can now exploit most critical smart contract bugs, the SEC’s proposed innovation exemption for tokenized securities, and a new $29M DeFi advocacy push in Washington.

Join us on X, PumpFun or YouTube at 12:00 pm ET

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• 🇺🇸🔓 Binance US is exploring renewed expansion in the United States after the SEC dropped its 2023 lawsuit, with founder Changpeng “CZ” Zhao signaling possible deeper banking ties or new licenses, while clarifying that these plans apply only to the American affiliate and not the global Binance exchange.

• 🚨📉 World Liberty Financial (WLFI) claimed its USD1 stablecoin was targeted in a coordinated attack, alleging hacked cofounder accounts, paid influencers spreading fear to trigger panic selling, and traders opening large short positions to profit as USD1 briefly slipped to 0.9802 and WLFI dropped over 8% before stabilizing.

• ☀️⚡ French energy giant Engie is considering adding battery storage or a bitcoin mining data center at its Assu Sol solar plant in Brazil, exploring ways to monetize excess electricity after grid congestion and renewable overcapacity have forced power curtailments that hurt project returns.

• 🕵️‍♂️📊 Onchain investigator ZachXBT announced he will release a major exposé on Feb. 26 targeting what he called one of crypto’s most profitable firms, alleging long-running insider trading by employees who misused internal data, while prediction market odds currently point to Solana-based liquidity protocol Meteora as the leading suspect.

• 🏦🪙 Crypto.com received conditional approval from the U.S. Office of the Comptroller of the Currency to operate a federally regulated national trust bank, allowing it to custody digital assets, handle staking, and settle trades under federal oversight, joining a growing list of crypto firms pursuing formal banking status amid regulatory shifts and pushback from traditional bank lobby groups.

• 💵 Trump’s newly formed “Board of Peace,” a coalition operating outside the United Nations, is exploring a dollar-backed stablecoin to enable digital payments in Gaza, where cash shortages caused by war have disrupted financial access, with Israeli tech entrepreneur Liran Tancman reportedly helping design the proposed digital payment infrastructure.

• 💸 Based, a Hyperliquid-powered Web3 trading and payments startup, secured $11.5 million in Series A funding led by Pantera Capital, with backing from Coinbase Ventures and Wintermute Ventures, structuring the deal as equity plus token warrants while building a platform that combines perpetual futures, prediction markets, wallet tools and future AI-driven finance features.

• ⚡₿ Canaan, a China-founded bitcoin mining hardware maker, acquired Cipher Mining’s 49% stake in three operational West Texas mining ventures in a $40 million share-based deal, gaining exposure to 120 megawatts of power capacity and strengthening its North American energy footprint while making Cipher a significant shareholder.

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