Jane Street Accused of Market Manipulation in TerraUSD Collapse

Trading firm Jane Street has been accused of market manipulation in connection with the TerraUSD (UST) collapse. The company deleted all its posts from its X account after allegations surfaced that it was involved in the 2020 crypto crash.

The incident has sparked debate over whether Jane Street's actions were responsible for the crash, or if the larger system is to blame. According to Jeff Park, chief investment officer at ProCap and advisor at BitWise, Authorized Participants (APs) like Jane Street have a unique role in the regulatory framework.

Park explained that APs are exempt from certain requirements, allowing them to short ETF shares without borrowing stock or incurring borrow costs. This exemption was designed to support orderly market-making but has created a 'window' for regulatory arbitrage, Park said.

Crypto analyst Justin Bechler agrees that the system is broken, but still suspects Jane Street of exploiting its privileged access to ETF redemption flows and manipulating prices to avoid losses.