Jump Trading Sued for $4B Over Alleged Terra Manipulation

• Terraform Labs administrator seeks $4 billion from Jump Trading over 2022 Terra collapse allegations.
• Lawsuit claims Jump bought LUNA at $0.40 while the market price was $110 through secret agreements.

The bankruptcy administrator of Terraform Labs has filed an enormous lawsuit against Jump Trading, claiming damages of up to 4 billion US dollars in connection with the collapse of the Terra ecosystem in 2022. The suit was brought against the trading company and its main executives, such as co-founder William DiSomma and former crypto president Kanav Kariya, filed by Todd Snyder. The lawsuit claims that Jump Trading had rigged the systems of Terra and made an illegal profit due to the crash that wiped out around 50 billion dollars worth of investor value.

Secret Deals and Market Manipulation Claims

The lawsuit exposes the claims of secret deals between Jump Trading and Terraform that could have concealed underlying weaknesses in the design of the Terra ecosystem. Jump Trading was allegedly offered to buy LUNA tokens at $0.40 when the market price was over $110, which was a tremendous discount that was not offered to ordinary investors. The firm, in turn, supposedly kept the dollar peg of TerraUSD artificially low, hiding the flaws in the algorithmic mechanism that was meant to automatically keep the currency stable.

The records of the court state that these arrangements were kept a secret in a so-called gentlemen’s agreement to avoid regulatory supervision, and that Jump falsely credited peg restorations to the algorithm. The Bitcoin reserve of the Luna Foundation Guard, which was meant to act as emergency insurance, was transferred to Jump in almost 50,000 BTC, with no reported terms and conditions. The founders of Terraform, including co-founder Do Kwon, who was recently sentenced to 15 years in prison after pleading guilty, allegedly instructed these transfers with Kariya at the time of the crisis.

The case is the second significant legal battle that Jump faces in relation to Terra, after the 2023 claims of violation of the Commodity Exchange Act and market manipulation. Kariya left his job soon after that first lawsuit, amidst claims of a CFTC investigation of the affairs of the company. Jump subsidiary Tai Mo Shan had already paid the SEC 123 million in a settlement on false statements to investors regarding the stability and security of TerraUSD. Jump Trading has refuted the existing claims but refused to comment on the claims of the bankruptcy administrator on the firm immediately.

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