Quantified giant Jane Street's harvest trick

Original by:Bull Theory

Compiled by Ken, Challenger

 

The entire business model of Jane Street appears, in terms of the number of allegations before it, to be to extract and profit from liquidity by artificially creating a market crash。

This has not happened only once, but repeatedly。

The Indian stock market case is the clearest example of how Jane Street works. They operated in India an algorithm similar to the “crash down at 10 a.m.”, earning $4.33 billion, but were eventually lost and temporarily suspended by the Securities and Exchange Commission of India。

It operates as follows。

Indian script

Between January 2023 and March 2025, Jane Street created a net profit of approximately Rs. 365.002 billion in Indian entities. Of the 21 marked expiry dates, SEBI determined that Rs. 48,435.7 million were suspected of being illegally acquired. SEBI issued a 105-page interim order and subsequently imposed a trade ban. The funds involved were deposited into a third-party trust account. The relevant appeal is still pending。

What matters is not the ban itself, but the mechanisms behind it。

Jane Street has the following operating structure:

Jane Street Singapore Pte Ltd (FPI)

Jane Street Asia Trading Ltd (FPI, Hong Kong)

3. JSI Investments Pvt Ltd (Indian subsidiary)

4. JSI2 Investments Pvt Ltd (Indian subsidiary)

This separation of entities makes it possible to attribute the overt transactional and actual profit margins to different corporate entities。

How does maturation work

Index options are settled on the basis of the final value of the index on the date of maturity. Small fluctuations in the index on the day of maturity could generate significant gains at the end of the options。

The strategy described by the Securities and Exchange Commission of India operates as follows:

Morning phase (around 9.15 a.m. to later in the morning)

• The Indian entity was active in buying constituent shares and futures from Bank Nifty。

• A huge order was made。

• In some days, they accounted for a large proportion of total market transactions。

Purchase weights push up the index. At the same time, the offshore entities have created large options open。

• Sold to see an increase in options。

• Buying down options。

• Net openings are seriously down。

In Delta terms, the size of the position is several times that of the stock position. This suggests that the purchase of shares is not a major bet, but a pre-set。

Afternoon phase (late morning to closing)

The Indian entity reversed the course of the transaction after the right book was built. They began to sell the same stocks and futures in large quantities。

The pressure of the sale led to an index decline. If the index price is close to some of the right-to-do prices, then the empty view of an increase in options will become worthless, while the view of a fall in options will increase significantly。

There was a slight loss in spot equities and a strong profit on the right end。

SEBI EXEMPLIFIES:

• The amount bought in the morning was Rs. 437.0 billion。

• There's a huge increase in options for Delta. Cash/future losses Rs. 6.160 billion。

• The option profites 73,493 million rupees。

Single-day net gain: Rs. 6733.3 million。

The spot market activity affected settlement points. The derivative books, on the other hand, capture real profits. This is India's usual tactic: to manipulate the proceeds of derivatives by taking advantage of the financial advantages of targeted assets。

2) Ten o'clock to manipulate the script

Now look at bitcoin。

Over the past few months, sales pressure has been repeated around 10 a.m. American East time. This period is very important:

• United States stock market opening。

• Increased liquidity。

• Large orders can be executed efficiently。

• Derivatives markets are active。

Model observed:

Prices suddenly fell. Leverage multiple positions are liquidated by the blast. I'm not sure if it's a good idea. Prices then stabilized。

The market for encrypted money is highly leveraged. The decline of 2 to 3 per cent was sufficient to wipe out a large number of positions。

When the liquidation engine starts:

• The exchange automatically sells collateral。

• The market price list is thrown into the order book。

• Prices fell further。

• Trigger more liquidation。

If a large trading company actively sells during this window: it can take the lead in launching the first fall. The liquidation mechanism will magnify this trend. The chain reaction completed the remaining harvest. When forced to sell, prices tend to rebound. This is very structurally similar to the Indian case: in India, the index is manipulated to influence the yield of options. In the area of encrypted currency, spot price fluctuations affect derivative clearing and futures warehousing。

The movement of the targeted asset is the trigger, and the derivative is the real profit engine。

One more detail is crucial. This 10 a.m. pattern ceased on 23 February 2026, following the filing of a case against Terraform。

Instead of being sold, Bitcoin rebounded. It is empty, not many. When a recurring mechanization pattern coincides with the disappearance of legal regulatory pressures, market participants naturally become particularly concerned。

3) IS THE LUNA CRASH USED TO FORCE BTC TO REDUCE PRICES FROM A BITCOIN POINT OF VIEW

In May 2022, Terra’s UST stabilization currency fell from a $40 billion ecosystem to zero in just a few days. The anchorage mechanism was broken, panic spread and the Bitcoin reserves, originally used to defend the system, were used under extreme pressure。

In addition to the breakaway incident itself, the action raised another structural possibility。

Terraform Labs used bitcoin reserves to maintain the UST anchor. If the UST is unstable, these reserves must be put into operation immediately。

This means that bitcoin must be sold or mortgaged in an emergency. The state of emergency would completely deprive the bargaining power。

Litigation:

• Jane Street knows that Curve pool liquidity has dried up。

• IN AN EXTREMELY WEAK LIQUIDITY SITUATION, THEY EXECUTED A $85 MILLION UST SALE。

• The anchor exchange rate collapsed quickly。

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

• Discussions reportedly included the purchase of bitcoin at very low discounts, which could range from $200 million to $500 million。

If Terraform is forced to defend the anchor exchange rate, they must move the Bitcoin reserves quickly. If someone knew in advance that the pressure was coming, then the pressure on UST would increase。

Increased pressure on the mooring mechanism means:

• Accelerated utilization of reserves

• Undermining the bargaining position of the other party

• GET AT A DISCOUNT BTC

The resulting assumption is simple:

Is this crash just an ordinary trade event, or is it being used as a lever to plunder the stocks of bitcoin at very low prices

These are allegations in ongoing proceedings. But the sequence of events clearly reveals the motives of interest。

If you want a full analysis of the Terra incident, we have published a detailed tweet。

NEXT IS ETF

Jane Street has become an authorized participant in several major bitcoin ETFs. Authorized participants are at the heart of ETF mechanisms for creation and foreclosure。

They can:

CREATES AN ETF SHARE。

REDEMPTION OF ETF SHARE。

Pumping through futures。

Sell options。

Undertake price differential arbitrage。

THE OPEN 13F FILE ONLY SHOWS ETF MULTIPLE POSITIONS. THEY DO NOT, HOWEVER, SHOW FUTURES EMPTY, SWAP CONTRACTS, OPTIONS SOLD, AND NET OPENINGS AFTER IMPACT. THE DISCLOSURE OF MULTIPLE POSITIONS IS NOT EQUIVALENT TO NET MULTIPLE OPENINGS。

It could be:

DO MULTIPLE ETF SHARES, MAKE EMPTY CME FUTURES, MAKE EMPTY OPTIONS, MATCH DEALS。

The public sees only the trading end on the surface, while the complete derivative books are hidden in the dark. Now, look at this in conjunction with the recurring pattern of spot sales。

IF THE SPOT PRICE IS UNDER PRESSURE IN A GIVEN WINDOW AT A GIVEN TIME, AND THE ETF OPENINGS ARE INCREASING, THE VISIBLE SURFACE DATA SIMPLY DO NOT REVEAL ITS COMPLETE STRATEGY。

IN INDIA, STOCK EXCHANGES ARE TRANSPARENT AND OPTIONS ARE THE REAL DRIVERS OF PROFIT. IN ETF, STOCK HOLDING IS TRANSPARENT BUT DERIVATIVE POSITIONS MAY NOT BE OPEN. THE STRUCTURAL SIMILARITIES BETWEEN THE TWO ARE THE LACK OF TRANSPARENCY BETWEEN THE OVERT AND COVERT TRANSACTIONS。

5) Most importantly, their technology is classified

Jubilee litigation -- sealed out $1 billion strategy. The Jubilee case is by no means an episode; it touches the technical core of the entire architecture。

In early 2024, two senior traders left Jane Street:

• Doug Schadewald - Senior index option trader

• Daniel Spottiswood -- his direct subordinate

They joined the Jubilee Management Company. Shortly afterwards, Jane Street filed a suit in the Manhattan Federal Court against Jubilee for stealing an extremely valuable proprietary strategy。

In the course of the court proceedings, a key detail was made public: the strategy focused on index options in India, generating about $1 billion in profits in 2023 alone。

This figure changes the nature of the event. It's not a little arbitrage strategy, it's a super-profit engine。

What did this lawsuit reveal

The lawsuit made three things clear:

• The strategy is rights-driven。

• It operates in the index derivatives market in India。

• It is extremely profitable and can be repeated。

However, almost all of its contents are hidden from the public as to how it works. A large section of the Tribunal's documents was blacked out. The public cannot see:

• An algorithm to generate a signal

• Model for the timing of implementation

• Right price selection framework

• Delta Open Management

• Cross-entity coordination process

• Risk control system

The only visible figure is profit. And the engine itself is still hidden。

Defence arguments:

Jubilee argued that India ' s options market structure was open information and that the strategy was not unique。

Separation traders claim that the system is based on experience and expertise rather than on hidden automated models. This led to a key disagreement:

If the advantage is only structural, then anyone can replicate it。

If the advantage lies at the implementation level — timing, coordination, silo size management, derivative layering — the system itself is a core asset. Implementation systems can be redeployed。

Why did this suit trigger surveillance

This action has had an unintended consequence. It has publicly revealed that a single trade strategy can capture some $1 billion annually in India。

THIS EXPOSURE TRIGGERED MEDIA REPORTS. MEDIA REPORTS LED TO REGULATORY REVIEWS. THE REGULATORY REVIEW EVENTUALLY LED TO THE SEBI INVESTIGATION. SEBI'S SUBSEQUENT INTERIM ORDER DESCRIBES A MATURATION STRUCTURE:

• Trends in the impact of spot transactions

• The huge options book has a huge return

The disclosure of this $1 billion strategy made the investigation inevitable. The case was settled in December 2024. The settlement clause was not made public. There was no full trial. There is no detailed strategy blueprint published。

Its core operating mechanisms remain sealed。

Why is it so important to paint something dark

The importance of these hidden elements lies in their structure. A $1 billion option strategy:

• Operating across multiple entities

• Dependence on derivative stratification

• Heated defense in the Federal Court

• Its internal operating mechanisms were erased from the public eye

It was the same company that later: faced charges of maturity manipulation by SEBI; was involved in Terra-related litigation; acted as an authorized participant in the main Bitcoin ETF; and held large ETF positions without disclosing their derivatives。

Internal trading systems (i.e. the executive level) are invisible in public documents. Public reports show only warehouse slots。

They do not demonstrate the logic of implementation. The court documents show only the charges. They don't show algorithm codes. Regulatory orders show results only. They don't reveal proprietary models。

When one company ' s most profitable system is classified as top secret and similar structural models are repeated in other markets, it is only logical to trigger scrutiny。

If a company can:

LEVERAGING TARGET MARKETS WITH HUGE AMOUNTS OF MONEY. LARGER DERIVATIVE EXPOSURES ARE THEN ADDED. CONTROL THE IMPACT AT THE SETTLEMENT LEVEL. INTER-ENTITY COORDINATION. DEEP INSIDE ETF'S BOTTOM MECHANISM. IT ALSO MAINTAINS THE HIGH LEVEL OF CONFIDENTIALITY OF THE IMPLEMENTATION SYSTEM。

Well, surface data can never reflect the whole picture。

A company at the centre of every market manipulation

Sam Bankman-Fried (SBF) worked for about three years in Jane Street before creating Alameda Research and later FTX. In April 2021, FTX invested $500 million in Anthropic and obtained about 8 per cent of its shares。

In May 2022, Terra and UST crashed. Alameda was reportedly severely damaged by the widespread collapse of the encrypted market. FTX was also subsequently declared insolvent。

In the liquidation of FTX from 2023 to 2024, its shares in Anthropic were sold to a valuation close to $18 billion。

Jane Street was the second-largest buyer of the financing round, with a cost of approximately $100 million to buy shares. Thus, the financial flows are closed:

• A former Jane Street dealer created FTX

• FTX. Early investment, Anthropic

• FTX CRASH

• Anthropic shares liquidated

• Jane Street acquired a portion of it, now worth $2.1 billion

In 2024, the Trump Media Technology Group sent an official letter to NASDAQ alleging potential naked sales, and named Jane Street as one of the companies responsible for large trading volumes during the collapse of its stock prices. Although no formal legal charges were subsequently filed, the company was publicly named in the dispute。

Add the following:

• INDIA SEBI ISSUED AN INTERIM INJUNCTION ACCUSING IT OF MANIPULATING THE MATURITY INDEX AND WITHHOLDING APPROXIMATELY $570 MILLION

• The Jubilee case revealed a black-faced Indian option strategy that makes about $1 billion a year

• On-going Terra suit, alleging insider trading in connection with the UST crash

• Jane Street as the core authorized participant in the main bitcoin ETF

• ITS POSITION AS ONE OF THE BIGGEST BUYERS OF IBIT

CROSSING STOCKS, DERIVATIVES, ENCRYPTED CURRENCY, ETF AND PRIVATE AI EQUITY FINANCING WHEELS, THE SAME COMPANY REPEATEDLY APPEARS IN THE FOLLOWING CASES:

Market manipulation. Liquidity crisis. Regulatory review. Capital sales events。

None of these independent incidents can be regarded as an absolute crime of complicity。

But the disturbing reality is:

Whenever there is a major collapse or turmoil in the market, Jane Street is often visible。

Is this only a necessary coincidence because it is one of the largest quantitative trading firms in the world, operating across all major asset classes

Or is there a deeper structural problem — the market positioning of the company that is inherently profitable from manipulation or crisis