The harvesting tactics of the quantitative giant Jane Street

null

Original author: Bull Theory

Compiled by: Ken, Chaincatcher

Judging by the number of charges faced, it seems that Jane Street’s entire business model is to squeeze liquidity and profit from it by artificially creating market crashes.

This does not happen just once, but many times.

The Indian stock market case is the clearest illustration of how Jane Street works. They ran a similar algorithm of “10 a.m. plunge” in India, making a profit of $4.23 billion, but it was eventually revealed and temporarily suspended by the Securities and Exchange Commission of India.

Here’s how it works.

Indian script

Between January 2023 and March 2025, Jane Street’s entities in India generated a net profit of approximately Rs 36,502 crore. On the 21 marked maturity dates, SEBI identified Rs 48,435.7 crore as suspected of being illicit gains. SEBI issued a 105-page interim order followed by a trading ban. The money involved in the case has been deposited into a third-party escrow account. The appeal is still ongoing.

It’s not the ban itself that matters, but the mechanism behind it.

Jane Street’s operating structure is as follows:

1. Jane Street Singapore Pte Ltd (FPI)

2. Jane Street Asia Trading Ltd (FPI, Hong Kong)

3. JSI Investments Pvt Ltd (India Subsidiary)

4. JSI2 Investments Pvt Ltd (Indian Subsidiary)

This separation of entities allows the apparent trading side and the actual profitable side to belong to different corporate entities.

How does expiration date manipulation work?

Index options are settled on the final value of the index on the expiration date. Small fluctuations in the index on the expiration date can generate huge returns on the options side.

The SEC of India describes how the strategy works as follows:

Morning Stage (around 9:15 am to late morning)

The Indian entity is actively buying constituents and futures of Bank Nifty.

A huge number of orders were placed.

On some days, their trading volume accounts for a significant portion of the total trading volume in the market.

Buying weighted stocks pushed the index higher. At the same time, foreign entities have built up large short exposure to options.

Sell the call option.

Buy a put option.

Net exposure is heavily bearish.

In terms of delta value, options positions are several times larger than stock positions. This shows that buying stocks is not the main bet, but only a foreshadowing before the layout.

Afternoon Stage (late morning to close)

After constructing the option book, the Indian entity reversed the course of the trade. They started selling the same stocks and futures in large numbers.

Selling pressure caused the index to fall. If the index closes close to some strike price, the short call option will become worthless, while the put option will appreciate significantly.

Spot stocks suffered a slight loss, while options were profitable.

SEBI Examples:

The morning purchase amount reached Rs 437 billion.

Option Delta exposure has expanded significantly. Cash/futures loss of Rs 616 crore.

The option made a profit of Rs 7,349.3 crore.

Single-day net gain: Rs 6,733.3 crore.

Spot market activity affected the settlement point. The derivatives book grabs real profits. This is India’s usual trick: to use the capital advantage of the underlying asset to manipulate the returns of derivatives.

2. Manipulate the script at 10 a.m

Now let’s take a look at Bitcoin.

For months, there has been repeated selling pressure around 10 a.m. ET. This time period is very important:

U.S. stocks open.

Increased liquidity.

Large orders can be executed efficiently.

The derivatives market is active.

Observed patterns:

The price suddenly dropped. Leveraged long positions were liquidated. Triggered a chain forced sell-off. Subsequently, the price stabilized.

The cryptocurrency market is extremely leveraged. A 2% to 3% decline is enough to wipe out a large number of long positions.

When the clearing engine starts:

Exchanges automatically sell collateral.

The market order is smashed into the order book.

Prices fell further.

Trigger more liquidations.

If a large trading firm sells aggressively during this window: it can initiate the first wave of decline. The liquidation mechanism amplifies this trend. Chain Reaction completes the rest of the harvest. After the forced sell-off is cleared, the price tends to bounce back. This is structurally very similar to the Indian case: In India, indices are manipulated to influence option returns. In the cryptocurrency space, spot price fluctuations can impact derivatives liquidation and futures positions.

The trend of the underlying asset is the trigger, and the derivatives side is the real profit engine.

There is another detail that is critical. This 10 a.m. pattern came to an end after the lawsuit against Terraform was filed on February 23, 2026.

Instead of suffering a sell-off, Bitcoin has rebounded. It was the bears, not the bulls, who were liquidated. When a recurring mechanization model disappears out of thin air when legal and regulatory pressure arises, market participants will naturally pay special attention.

3. Was the LUNA crash used to force BTC to drop in price from a Bitcoin perspective?

In May 2022, Terra’s UST stablecoin plummeted from a $40 billion ecosystem to zero in just a few days. The anchoring mechanism was broken, panic accelerated, and the Bitcoin reserves that were originally used to defend the system were forced to be used under extreme pressure.

In addition to the unanchoring incident itself, the lawsuit raises another structural possibility.

Terraform Labs has used Bitcoin reserves to maintain UST’s peg. If UST becomes unstable, these reserves must be put into use immediately.

This means that Bitcoin must be sold or staked in case of an emergency. Emergencies completely deprive bargaining power.

The lawsuit alleges:

Jane Street knew that the liquidity in the Curve pool had dried up.

In the face of extremely weak liquidity, they executed an $85 million UST sell-off.

The anchor exchange rate collapsed rapidly.

During the crisis, Jane Street maintained direct contact with Do Kwon.

The discussion reportedly included buying Bitcoin at a very low discount, potentially between $200 million and $500 million.

If Terraform is forced to defend the anchor rate, they will have to quickly mobilize their Bitcoin reserves. If someone knew in advance that this pressure was coming, increasing the pressure to short UST would accelerate this moment.

Applying more pressure to the anchoring mechanism means:

Accelerate the use of reserves

Weaken the other party’s negotiating position

Get BTC at a discounted price

The conjecture that arises from this is simple:

Was this crash just an ordinary trading event, or was it used as leverage to plunder Bitcoin reserves at extremely low prices?

These are allegations in the ongoing lawsuit. But the sequence of events clearly reveals the motives for their interests.

If you want to know the full breakdown of the Terra event, we have posted a detailed tweet.

4. ETFs are next

Jane Street has become an authorized participant in several major Bitcoin ETFs. Authorized participants are at the heart of the ETF creation and redemption mechanism.

They can:

Create ETF shares.

Redeem ETF shares.

Hedging through futures.

Sell options.

Carry out spread arbitrage.

The public 13F filing only shows the ETF’s long position. But they don’t show: short futures, swap contracts, options sold, and net exposure after hedging. Disclosed long positions are not equivalent to net long exposure.

It could be:

Long ETF stocks, short CME futures, short options, pair trades.

The public only sees the trading side on the bright side, while the complete derivatives book is hidden in the dark. Now, look at this in conjunction with the recurring spot selling pattern.

If the spot price is under pressure during a specific time window while ETF exposure is increasing, visible surface data simply does not reveal its full strategy.

In India, stock trading is transparent, and options exposure is the real driver of profits. In ETFs, stock holdings are transparent, but derivatives positions may not be public. The structural similarity between the two is the opacity between overt and hidden transactions.

5. Most importantly, their trading techniques are classified as confidential

Millennium Lawsuit – A $1 billion strategy that was sealed. The Millennium Lawsuit is by no means an episode, it touches the technical core of the entire architecture.

In early 2024, two veteran traders left Jane Street:

Doug Schadewald - Senior index options trader

Daniel Spottiswood – his direct subordinate

They joined Millennium Management. Shortly after, Jane Street sued Millennium in federal court in Manhattan, accusing it of stealing a highly valuable proprietary trading strategy.

During the court proceedings, a key detail was made public: the strategy’s focus on Indian index options, generating approximately $1 billion in profits in 2023 alone.

This number changes the nature of events. This is no longer a small arbitrage strategy, but a super profit engine.

What does this lawsuit expose?

The lawsuit clarifies three things:

The strategy is driven by options.

It operates in the Indian index derivatives market.

It is extremely profitable and repeatable.

However, almost everything about how exactly it works is hidden from the public. Large pieces of court documents were blacked out. The public cannot see:

Algorithms for generating signals

Model of execution timing

Strike price selection framework

Delta exposure management

Coordinate processes across entities

Risk control system

The only visible number is profit. And the engine itself remains hidden.

Defense’s arguments:

Millennium argues that India’s options market structure is public information and that the strategy is not a secret.

Departing traders claim that the system is built on experience and expertise, not a hidden automated model. This leads to a key divergence:

If the advantage is merely structural, then anyone can replicate it.

If the advantage lies in the execution level - timing control, coordination and cooperation, position size management, derivatives hierarchical layout - then the system itself is the core asset. The execution system can be redeployed.

Why did this lawsuit trigger regulation?

The lawsuit had an unintended consequence. It publicly disclosed that a single trading strategy can make about $1 billion in profits in India each year.

The revelation sparked media coverage. Media reports have attracted regulatory scrutiny. The regulatory scrutiny ultimately led to an investigation by SEBI. SEBI’s later interim order describes an expiration date manipulation structure:

Spot trading affects the index

The huge options book grabs huge returns

The exposure of this billion-dollar strategy made the investigation inevitable. The case was settled in December 2024. The terms of the settlement were not disclosed. There was no full trial. Nor has a detailed strategic blueprint been announced.

Its core operating mechanism is still sealed.

Why is blacked out content important?

The importance of these redacted contents lies in their structure. A $1 billion options strategy:

Operates across multiple entities

Rely on derivatives for hierarchical layout

Fiercely defended in federal court

Its internal workings were erased from public view

And it was the same company that, later: faced SEBI’s accusations of maturity manipulation; being embroiled in a Terra-related lawsuit; Acting as an authorized participant in a major Bitcoin ETF; Holds a huge ETF position without disclosing its derivatives hedging.

The internal trading system (i.e., the execution layer) is invisible in public documents. Public reports only show positions.

They do not demonstrate execution logic. Court documents only show the allegations. They do not display algorithmic code. Regulatory orders only show results. They do not reveal proprietary models.

When a company’s most profitable system is classified as top secret, and similar structural patterns are repeated in other markets, it is natural to trigger intense scrutiny.

If a company can:

Use a huge amount of funds to manipulate the target market. Behind it is superimposed with larger derivatives exposure. Control the impact at the settlement level. Coordinate across entities. Dive into the underlying mechanics of ETFs. And maintain a high level of confidentiality of the executive system.

Then, superficial data can never tell the whole story.

A company that is at the center of the whirlpool in every market manipulation event?

Sam Bankman-Fried (SBF) worked at Jane Street for about three years before founding Alameda Research and later FTX. In April 2021, FTX invested $500 million in Anthropic, acquiring about 8% of the shares.

In May 2022, Terra and UST collapsed. Alameda reportedly suffered a blow in that widespread crash in the crypto market. FTX also subsequently declared bankruptcy.

During FTX’s bankruptcy liquidation proceedings in 2023-2024, its holdings in Anthropic were sold at a valuation of nearly $18 billion.

Jane Street was the second largest buyer of the round, spending about $100 million to buy shares. Therefore, the closed loop of funds flows is as follows:

A former Jane Street trader founded FTX

FTX invested in Anthropic in the early days

FTX collapsed

Anthropic shares were liquidated

Jane Street acquired part of it, which is now worth $2.1 billion

In 2024, Trump Media & Technology Group formally sent a letter to Nasdaq alleging potential naked short selling and naming Jane Street as one of the companies responsible for accounting for significant trading volume during its stock price crash. Although no formal legal charges were filed afterwards, the company was publicly named in the dispute.

Plus the following events:

India’s SEBI issued a temporary injunction accusing it of manipulating the maturity index and seized approximately $570 million

The Millennium lawsuit exposed a blacked out Indian options strategy that made about $1 billion a year

The ongoing Terra lawsuit alleging insider trading related to the UST crash

Jane Street serves as a core authorized participant in major Bitcoin ETFs

Its position as one of IBIT’s largest buyers

Spanning equity, derivatives, crypto, ETFs, and private AI equity funding rounds, the same company has repeatedly appeared in the following situations:

Market manipulation. Liquidity crisis. Regulatory review. Capital sale events.

None of these independent incidents can absolutely confirm that they are co-crimes.

But the disturbing reality is:

Whenever there is a major market crash or turmoil, Jane Street is often there.

Is this simply a coincidental coincidence that it is one of the world’s largest quantitative trading firms, operating across all major asset classes?

Or is there a deeper structural problem - the company’s market positioning is inherently capable of grabbing huge profits from manipulation or crisis?