Jane Street: The $1 Billion USD Machine or the "Ghost" Behind Global Market Crashes?

With a series of allegations, it appears that Jane Street’s entire business model is draining liquidity by crashing the market and profiting from it. This has happened multiple times, not just once. The incident in the Indian stock market is the clearest example of how Jane Street operates. They used a similar algorithm to the “10 AM slam” in India and made $4.23 billion, but were discovered and temporarily banned by the Securities and Exchange Board of India (SEBI). Indian Playbook

From January 2023 to March 2025, Jane Street’s subsidiaries in India earned a net profit of approximately 36,502 crore rupees. During 21 marked expiry days, SEBI identified 4,843.57 crore rupees as illegal profits. A 105-page temporary order was issued. Subsequently, trading bans were enforced. The funds were deposited into margin accounts. Appeals are still ongoing. The key issue is not the ban itself but the enforcement mechanism. Jane’s operations are conducted through: Jane Street Singapore LLC (FPI) Jane Street Asia Trading LLC (FPI, Hong Kong) JSI Investment LLC (India subsidiary) JSI2 Investment LLC (India subsidiary) This separation allows the visible activities to be distinguished from profit-driven activities within different entities. How Does the Sophisticated Exploitation Mechanism Work? Index options are settled based on the final value of the index on the expiration date. Small fluctuations on expiration can generate large payouts in options. SEBI’s strategy operates as follows:

Morning Phase (around 9:15 AM – late morning) The domestic entity aggressively bought component stocks of the Bank Nifty index and futures. Orders were placed in large volumes. In some sessions, they accounted for a significant portion of total market liquidity. Heavy buying of large-cap stocks caused the index to rise, as these stocks have high weights in the index basket. Meanwhile, offshore entities built large net bearish options positions, including: Selling call options Buying put options → Overall, the net position was heavily bearish.

The options positions far exceeded the stock positions in delta terms, indicating that stock purchases were not the primary goal but part of a strategic setup. Afternoon Phase (late morning to close) After establishing the options portfolio, the Indian branch reversed the flow. They sold the same amount of stocks and futures. Selling pressure pushed the index down. If the index closed near a certain strike price, short-term call options would expire worthless, and put options would increase in value. Stocks recorded minor losses, while options showed significant gains. SEBI’s example:

• Morning purchases: 4,370 crore rupees
• Increased volatility risk in options
• Loss of 61.6 crore rupees from cash/futures trades
• Profit of 734.93 crore rupees from options trading Net profit: 673.33 crore rupees in one day. Market activity affected settlement levels. Derivative order books captured real cash flows. This was India’s strategy: using underlying asset capital to influence derivative settlements. 10 AM Exploitation Scenario It’s Bitcoin’s turn. For months, continuous selling pressure appeared around 10 AM Eastern Time. This time frame is critical:
• U.S. stock markets open
• Liquidity increases
• Large orders can be executed efficiently
• Derivative markets are active Observed pattern:
• Sudden decline
• Liquidation of long leveraged positions
• Mass sell-offs
• Then stabilization Cryptocurrency markets are highly leveraged. A 2-3% drop can wipe out substantial long-term investments. When liquidation tools activate:
• Automated exchanges sell collateral assets
• Market orders are executed
• Prices continue to fall
• More liquidations occur If a major trading firm sells heavily during this period, it can trigger the initial move. Liquidation of assets amplifies this effect, creating a chain reaction. After the panic, prices often recover. Structural Similarity with India: In India, the index is adjusted to influence options settlement. In crypto, spot price volatility can impact derivative liquidations and futures positioning. The core trigger is the underlying movement. Derivative tools generate profits. Another key detail: after the Terraform lawsuit filed on February 23, 2026, the 10 AM pattern ceased. Instead of a sell-off, Bitcoin prices rose. Short positions were liquidated rather than longs. When a machine-like pattern repeats and then disappears just as legal pressure emerges, market participants take notice. BTC Perspective: Was Luna’s Collapse Exploited to Drive Prices Lower? In May 2022, Terra’s stablecoin UST collapsed from a $40 billion ecosystem to zero within days. The peg broke, panic ensued, and Bitcoin reserves used to defend the system were drained under extreme pressure. Beyond the peg failure, the lawsuit suggests another structural possibility. Terraform Labs used Bitcoin reserves to maintain UST’s peg. If UST lost stability, those reserves would need to be used immediately. This implies selling or collateralizing BTC in an emergency, which eliminates negotiation capacity. The lawsuit alleges:
• Jane Street knew that cash in the Curve fund had decreased
• A $85 million US Treasury bond sale was executed amid lower liquidity
• The peg quickly lost stability
• During the crisis, Jane Street directly contacted Do Kwon
• Reports indicate discussions included buying BTC at heavily discounted prices, potentially up to $200 million to $500 million If Terraform was forced to defend the peg, they would need to quickly mobilize BTC. Anyone aware of this pressure could accelerate it. Greater pressure on the peg means:
• Faster deployment of reserves
• Weaker bargaining position
• Access to BTC at favorable prices The simplest interpretation: Was the collapse merely a trading event, or was it used as leverage to buy reserves at low prices? These are allegations in an ongoing lawsuit, but the sequence of events clearly reveals underlying motives. Next: ETF Funds Jane Street has become an authorized participant for major Bitcoin ETFs. They participate in creation and redemption mechanisms. They can:
• Create ETF shares
• Redeem ETF shares
• Hedge risks via futures
• Write options
• Arbitrage spreads Public 13F filings only show ETF long positions. They do not reveal:
• Short futures contracts
• Swaps
• Sold options
• Net risk after hedging A reported long position does not automatically mean low risk; it could also involve:
• Buying ETF shares, shorting CME futures, shorting options, or pair trading The public only sees the visible trades. The entire derivatives order book remains private. Combine this with repeated spot-selling models. If spot markets face pressure at specific times while ETF exposure increases, the displayed data may not reflect the full strategy. In India, stock trading is highly transparent. Real profits come from options trading. ETF holdings are public, but derivative positions may not be. The structural similarity lies in the lack of transparency between public and private trading activities. Most importantly, their trading technology is concealed The Millennium lawsuit, with its $1 billion strategy sealed, is not a side story. It is the core technical element of this entire structure.

In early 2024, two senior traders left Jane Street:

• Doug Schadewald, senior index options trader
• Daniel Spottiswood, his direct subordinate They joined Millennium Management. Soon after, Jane Street sued Millennium in Manhattan federal court, accusing the firm of stealing a highly valuable proprietary trading strategy. During litigation, a key detail was revealed: this strategy focused on Indian index options and generated about $1 billion in profit just in 2023. That figure changed the scope of the discussion. It’s not a small arbitrage idea; it’s a profit-generating machine. What did the lawsuit reveal? It clarified three points:
• The strategy is based on options
• The firm operates in India’s index derivatives market
• The method is highly effective and repeatable However, most operational details are hidden from public view. Many parts of the court records are redacted. The public cannot see:
• The algorithm generating signals
• Real-time execution models
• Attack window frameworks
• Delta risk management
• Coordination between entities
• Risk control systems The only visible figure is profit. The underlying engine remains concealed. Defense arguments:
• Millennium claims that India’s options market structure is public and not a secret
• Traders leaving assert that the system is built on experience and expertise, not automated hidden models This makes a crucial difference:
• If the edge is purely structural, anyone can copy it
• If the edge relies on execution timing, coordination, size management, and layered derivatives, then that system itself is an asset. Execution systems can be redeployed. Why does this lawsuit trigger regulatory intervention? It inadvertently exposed that a single trading strategy generates about $1 billion annually in India. The revelation led to media coverage, which prompted regulatory scrutiny. This resulted in SEBI’s investigation. SEBI’s temporary order described the expiration impact as follows:
• Cash trades influenced index volatility
• Larger options order books yielded profits The existence of a $1 billion strategy made an investigation unavoidable. The case was settled in December 2024. Terms are undisclosed. No full trial occurred. No detailed strategic plan was published. Technical details remain confidential. Why is Concealing Information Important? It’s crucial to omit structural details. A $1 billion options strategy:
• Operates across multiple entities
• Relies on layered derivatives methods
• Was fiercely defended in federal court
• Its internal structure is hidden from public view The same company later faced allegations of expiry manipulation from SEBI, was named in a lawsuit related to Terra, and acts as an authorized participant for major Bitcoin ETFs, holding large ETF positions that are not publicly disclosed. The internal trading system—layered execution—remains hidden in public filings. Public reports only show positions. They do not reveal execution logic. Court records only show allegations. They do not disclose proprietary algorithms. Regulatory orders only show outcomes. They do not reveal exclusive models. When a company’s most profitable system remains secret while similar structural models appear elsewhere, it underscores the need for scrutiny. If a company can:
• Move the underlying market at scale
• Add layers of derivative risk behind
• Capture settlement influence
• Coordinate across entities
• Operate within ETF systems
• Keep execution systems sealed then surface data will never reflect the full picture. Is a Company Always at the Center of Market Manipulation? Sam Bankman-Fried worked at Jane Street about three years before founding Alameda Research and later FTX. In April 2021, FTX invested $500 million in Anthropic, acquiring about 8% stake. In May 2022, Terra and UST collapsed. Alameda reportedly suffered significant losses during that large-scale crypto unwind. Subsequently, FTX declared bankruptcy. During FTX’s bankruptcy in 2023–2024, its stake in Anthropic was sold at a valuation close to $18 billion. Jane Street was the second-largest investor, buying about $100 million worth of shares. The capital raising sequence was:
• A former Jane Street trader built FTX
• FTX invested early in Anthropic
• FTX collapsed
• Anthropic shares were liquidated
• Jane Street bought part of the company, now valued at $2.1 billion In 2024, Trump Media & Technology Group officially sent a letter to Nasdaq accusing uncollateralized short selling, naming Jane Street as one of the main firms responsible for much of the trading volume during their stock decline. No formal charges followed, but the firm was publicly named in that dispute. Add this:
• SEBI’s temporary order in India accuses index manipulation at expiry and seizes about $570 million.
• The Millennium lawsuit revealed that the options trading strategy in India was concealed, generating about $1 billion in revenue in one year.
• The ongoing Terra lawsuit alleges insider trading related to UST’s collapse.
• Jane Street’s role as an authorized participant for major Bitcoin ETFs
• Its position as one of the largest buyers of IBIT Across stock markets, derivatives, cryptocurrencies, ETFs, and private AI funding rounds, the same firm repeatedly appears during: Market manipulation. Liquidity stress. Regulatory oversight. Capital crises. None of these events alone constitute coordinated misconduct. But the uncomfortable reality is: When markets are volatile, Jane Street is often involved. Is this an inevitable consequence of being one of the world’s largest quantitative trading firms operating across all asset classes? Or is there a deeper structural aspect— a company whose position naturally benefits from manipulation or crises?