Allegations Mount: Jane Street Accused of Insider Trading, Market Manipulation and ‘10am’ Bitcoin Dumps
Jane Street, a top U.S. quantitative trading firm, faces multi-jurisdictional allegations of market manipulation. A 2026 lawsuit by Terraform Labs’ bankruptcy estate alleges Jane Street used inside information from a former Terraform intern to preemptively withdraw funds from Curve3pool minutes before Terraform removed $150m UST in May 2022—actions the suit says helped trigger Terra/LUNA’s $40bn collapse. Separately, India’s SEBI found Jane Street manipulated the Bank Nifty index across 18 derivatives expiry days (Jan 2023–Mar 2025) via coordinated morning buy-ups and afternoon sell-offs, earning estimated illicit gains of ₹4.843 billion (~$580m); regulators banned the firm from Indian markets and froze >$560m in custody. The firm is also implicated in a recurring pattern dubbed the “10am dump”: sharp BTC sell pressure around 10:00 ET coinciding with NYSE open that liquidated leveraged longs and pressured spot and ETF prices. Jane Street is one of four authorized participants for BlackRock’s IBIT, and filings show large IBIT and MSTR positions. After the Terraform lawsuit became public, the 10am sell pattern reportedly disappeared and Bitcoin rallied >3% to break $68,000, with significant ETF inflows and short squeezes. Jane Street denies the claims as baseless. Traders should note potential regulatory risk for APs, structural vulnerabilities introduced by spot BTC ETFs, and the possibility that disruption to algorithmic selling could remove a key downward pressure on crypto markets.
Bullish
Short-term market reaction can be bullish. The removal or suspension of alleged algorithmic sell pressure—if Jane Street paused the alleged ’10am’ dumps due to litigation or regulatory risk—reduces a recurring downward force on BTC and ETF prices. Evidence cited: disappearance of the 10:00 ET sell pattern after the Terraform lawsuit and an immediate BTC rebound above $68k with ETF inflows and large short liquidations. Historically, elimination of concentrated selling (or closure of dominant liquidity providers) can trigger squeezes and volatility-driven rallies. Longer term, the news is structurally mixed: allegations of insider trading and index manipulation increase regulatory scrutiny on authorized participants and market-makers, raising execution and compliance risk and potentially reducing liquidity or increasing trading costs—factors that can constrain upside. However, successful enforcement that curtails abusive selling could improve market fairness and support price discovery. For traders: expect elevated volatility around legal/ regulatory milestones (court rulings, SEBI/SEC actions), potential short squeezes when concentrated sellers pause, and intermittent liquidity gaps if major APs face bans or capital locks. Risk management: monitor AP filings, ETF flows, on-chain transfers, and court developments; tighten stops for leveraged positions and consider event-driven long exposures around enforcement milestones.