Gene Street and Indian Markets: Methods for Extracting Profits from Market Volatility

Regulatory and ongoing judicial investigations have uncovered a complex network of strategies used by major quantitative trading firms to exploit market volatility. At the center of these events is Jane Street, which has appeared in multiple market crises—from Indian markets to cryptocurrencies—raising sharp questions about the transparency of modern trading structures.

India: Documented Manipulation Model

In 2025, India’s Securities and Exchange Board (SEBI) issued a 105-page provisional order documenting organized manipulation mechanisms in Indian derivatives markets. Between January 2023 and March 2025, entities linked to Jane Street in India earned a net profit of approximately ₹365 billion.

But the key isn’t just the profit size; it’s how it was achieved. SEBI identified around ₹48.4 billion as suspicious gains and uncovered a pattern of manipulation over 21 specific days.

Legal Entity Structure

Jane Street used a multi-layered structure separating the apparent trading interface from the true profit engines:

• Jane Street Singapore for Foreign Portfolio Investments (FPI)
• Jane Street Asia for trading from Hong Kong
• Indian JSI Investment Companies (Branches 1 and 2)

This deliberate separation allows hiding the true positions from regulators and investors.

How the Impact on Settlement Points Strategy Is Executed

The strategy relies on a deep understanding of Indian options index settlement mechanisms:

Morning Phase (around 9:15 AM):
Indian entities began accumulating large positions in Bank Nifty stocks and futures—sometimes representing a significant portion of total market volume. Simultaneously, foreign entities established large short positions in options:

• Selling call options
• Buying put options
• A strongly bearish net stance

Option delta values—by dollar—were several times larger than stock positions, indicating stock purchases were just preparatory steps.

Evening Phase (late morning to close):
Indian entities reversed course, selling stocks and futures in large volumes, causing a sharp decline in the index. If the closing price approached certain strike points, call options became worthless while put options’ value surged.

Result: minor losses in spot stocks, massive gains in options.

A real example from SEBI: buying ₹437 billion in the morning, incurring a cash/forward loss of ₹6.16 billion, but making ₹734.93 billion in options profits. Daily net profit: ₹67.3 billion.

Bitcoin: Same Pattern, Different Markets

A similar pattern appeared in cryptocurrency markets. Over recent months, repeated sell-offs occurred around 10:00 AM New York time—coinciding with:

• US market opens
• Increased liquidity
• Large order execution efficiency
• Heavy derivatives activity

Observed pattern: sudden crash → liquidation of long positions → forced selling chain → subsequent stabilization.

Crypto markets feature extremely high leverage. A 2-3% dip can wipe out massive long positions. When automatic liquidation mechanisms activate:

• Exchanges automatically sell collateral
• Sell orders flood order books
• Prices drop further
• Additional liquidation waves are triggered

If a major trading firm actively sells during this window, it can initiate the first wave of decline. After forced liquidations, prices often rebound.

Notably, after a lawsuit against Terraform in February 2026, this pattern at 10 AM stopped entirely. When a mechanical recurring pattern disappears amid regulatory pressure, the market involvement becomes much clearer.

Terra Collapse: Exploiting the Crisis

In May 2022, Terra’s system collapsed, wiping out $40 billion. Terraform Labs was using Bitcoin reserves to defend the UST stablecoin peg.

According to ongoing litigation, complex financial accounts reveal:

• Jane Street knew Curve fund liquidity was exhausted
• Under very low liquidity, they executed an $85 million UST sell-off
• The exchange rate rapidly collapsed
• Jane Street was in direct contact with Terraform’s founder
• Discussions involved buying Bitcoin at a deep discount ($200–$500 million)

If Terraform had to defend the peg, it would need to rapidly deploy Bitcoin reserves. Those with prior knowledge of this pressure could accelerate the moment of collapse by increasing UST selling.

Hypothesis: Was the collapse a normal trading event, or was it used as leverage to seize Bitcoin reserves at very low prices?

ETFs: Controlling the Apparent Front

Jane Street has become an authorized participant for several major Bitcoin ETFs. Authorized participants are central to ETF creation/redemption mechanisms and can:

• Create ETF units
• Redeem shares
• Hedge via futures
• Sell options
• Execute arbitrage trades

Public filings (13F reports) show only long positions. But they do not reveal:

• Short futures positions
• Swap contracts
• Sold options
• Actual net stance after hedging

Reported long positions do not equal the true net exposure. A firm might buy ETF shares while shorting futures on CME, selling options, and executing complex hedging.

What the public sees is only the trading façade. The full derivatives book remains hidden.

Legal Case: A $1 Billion Strategy

In early 2024, two veteran traders left Jane Street for Millennium Management:

• Doug Shadoul—specialist in index options
• Daniel Spotswood—his direct subordinate

Jane Street filed a federal lawsuit in Manhattan, accusing them of stealing a high-value proprietary trading strategy.

The key revelation: the strategy focused on Indian index options and earned about $1 billion in 2023 alone.

This number transformed the case entirely. It was no longer a small hedging tactic but a major profit engine.

What the Lawsuit Revealed

The lawsuit identified three main points:

• The strategy is options-based
• It operates in the Indian derivatives market
• It generates very high, repeatable profits

But most details of its actual operation remain hidden. Large parts of the documents are redacted:

• The algorithm generating signals
• The timing execution model
• The strike selection process
• Delta risk management
• Coordination among entities
• Risk management system

The only visible figures are profits. The engine itself remains concealed.

A settlement was reached in December 2024. Terms were not disclosed. No full trial occurred. The true mechanics of the strategy remain secret.

Broader Pattern: Jane Street at the Heart of Crises

Why is it important to assemble these events?

The significance lies in the repeated pattern and structure:

$1 Billion Options Strategy:

• Operates through multiple legal entities
• Relies on layered derivatives planning
• Was vigorously defended in federal courts
• Its operational mechanisms are hidden from the public eye

The same company that:

• Later faced SEBI allegations of manipulation in Indian settlement dates
• Was involved in lawsuits over Terra and UST collapse
• Acts as an authorized participant for major Bitcoin ETFs
• Holds large positions without full disclosure of derivatives hedges

The Underlying Thread

The internal trading system (execution layer) is invisible in public reports. Public filings show only positions, not the logic behind them. Judicial documents reveal only claims, not algorithm codes. Regulatory orders show results, not proprietary models.

When the most profitable system for the firm is classified as a trade secret, and a similar pattern repeats across markets, rigorous scrutiny is justified.

If a firm can:

• Control target markets with massive volumes
• Add larger derivatives positions afterward
• Influence settlement levels
• Coordinate across legal entities
• Break into core ETF mechanisms
• Keep execution systems secret

then surface data alone will never tell the full story.

Summary: Trust and Transparency

Sam Bankman-Fried, founder of FTX, worked at Jane Street for nearly three years before founding his empire. This connection is no coincidence; it reflects a broader pattern.

In 2024, Trump’s company sent an official letter to Nasdaq accusing market manipulation and named Jane Street as a potential culprit.

Across stocks, derivatives, cryptocurrencies, ETFs, and private finance, the same firm repeatedly appears amid market turmoil.

Is this mere coincidence? Or is there a systematic intent behind exploiting volatility and crises?

Answering this requires stronger regulatory oversight and greater transparency. Markets built on trust cannot thrive when the true mechanisms are hidden from view.