Jane Street Faces New Lawsuit: Trump Media Calls for Federal Investigation

Jane Street, a leading market-making firm, is facing serious allegations amid the ongoing turbulence in the cryptocurrency market. Alongside a federal lawsuit regarding the collapse of Terraform Labs, claims from Trump Media have ignited further scrutiny, focusing on alleged "naked short selling."

Key Takeaways

Jane Street is facing legal challenges linked to the collapse of the Terra/Luna ecosystem.
The firm is accused of using confidential information to avoid substantial losses.
Increasing allegations suggest Jane Street manipulated Bitcoin prices.
Trump Media has called for a federal investigation into Jane Street and others for naked short selling.
No official confirmation of Trump Media’s letter has been made public as of now.

Jane Street

Legal Challenges for Jane Street

Jane Street, one of the world’s largest market-making firms, is currently under intense scrutiny due to several allegations connecting the firm to significant disruptions in the crypto market. Earlier this week, on February 23, a lawsuit was filed in the US District Court for the Southern District of New York. This suit accuses Jane Street of utilizing confidential information obtained from Terraform Labs to shield itself from heavy losses prior to the collapse of the Terra/Luna ecosystem in May 2022.

The lawsuit claims that Jane Street leveraged insider knowledge to avoid over $200 million in potential losses just ahead of the ecosystem's downfall. In response to these allegations, Jane Street has firmly denied any wrongdoing, describing the lawsuit as a “desperate” effort and a “transparent attempt to extract money.”

Jane Street
The 1D chart shows the total crypto market cap valuation at $2.29 trillion. Source: TOTAL on TradingView.com

Allegations of Bitcoin Manipulation

In addition to the lawsuit, further claims have emerged on social media. Some participants in the market allege that Jane Street has manipulated Bitcoin (BTC) prices. These assertions suggest that the firm operated an algorithm that triggered consistent sell-offs at 10 a.m. daily for several months. The strategy allegedly aimed to push prices down, prompting liquidations among retail traders, after which Jane Street would repurchase Bitcoin at lower prices, creating a repetitive cycle.

Inquiry into Naked Short Selling

Compounding the controversy, market commentator MartyParty claimed on Thursday that Trump Media had submitted a letter to members of Congress, demanding a comprehensive investigation into Jane Street, Citadel, and other firms for their alleged engagement in naked short selling. This practice involves selling shares without first borrowing them and is restricted under U.S. securities law.

As of Thursday afternoon, Eastern Time, there has been no official acknowledgment of the letter from Trump Media or any public statements from Jane Street or Citadel to verify these claims.

Featured image from OpenArt, chart from TradingView.com