Terraform Labs Sues Jump Trading For $4 Billion Over Collapse Of TerraUSD And LUNA
Terraform Labs’ court-appointed administrator has sued Jump Trading and top executives for $4 billion, alleging their actions directly triggered the 2022 collapse of TerraUSD and LUNA.
The lawsuit, reported by the Wall Street Journal and confirmed by Terraform Labs in a Dec. 19 post on X, targets Jump co-founder William DiSomma and former president Kanav Kariya.
Administrator Todd Snyder claimed that the firm enriched itself through “illegal conduct that directly caused the largest crypto collapse in history.”
Snyder alleges Jump Trading exploited a backdoor deal with Terraform, artificially inflating TerraUSD before its value plunged, a move reportedly netting the firm billions. Similar arrangements were cited in SEC findings, which said Jump’s crypto unit profited $1.28 billion while misleading investors.
The company said that Jump Trading played a “direct role” in the ecosystem’s collapse, and that its executives had enriched themselves “through illicit market manipulation, self-dealing, and misuse of assets.”
“This action is a necessary step to hold Jump Trading accountable for illegal conduct that directly caused the largest crypto collapse in history,” Snyder said, emphasizing that investors and creditors deserve restitution for the losses caused.
A spokesperson for Jump Trading reportedly said that the lawsuit was a “desperate attempt” to shift blame away from Terraform Labs and its co-founder Do Kwon.
Jump Trading Entered Into A Backdoor Deal With Terraform Labs
Snyder claimed that Jump Trading had “actively exploited” the Terraform Labs ecosystem by entering into a backdoor deal with the company.
The administrator alleged that the market making firm artificially inflated the value of Terraform Labs’ algorithmic stablecoin, TerraUSD, before the token’s value plummeted, triggering a multi-billion-dollar domino effect that left the crypto market in a fragile state for months. According to Snyder, Jump Trading had profited billions of dollars from the arrangement.
Secret dealings between Terraform Labs and Jump Trading similar to the one alleged by Snyder have been previously detailed in findings by the US Securities and Exchange Commission (SEC).
Last year, the regulator said that Jump Trading’s crypto unit, Tai Mo Shan, had stepped in to buy $20 million worth of TerraUSD in May 2021 after the token had briefly lost its peg to the US dollar. In exchange for its help, Tai Mo Shan had received unlocked Luna tokens early, which it was then able to sell into the market.
The SEC said that through that deal, both companies had misled investors about the efficacy of the stablecoin’s peg mechanism. In a complaint, the agency also accused Jump Trading’s crypto unit of making $1.28 billion from the arrangement.
Terraform Collapse Had Wiped Out $45B From The Crypto Space
Terraform Labs was founded in 2018 by Kwon and Daniel Shin with the goal to build a decentralized blockchain ecosystem that was anchored by its own algorithmic stablecoin.
In early May 2022, that stablecoin started to lose its peg to the dollar, and fell far below the $1 mark due to large selloffs and dwindling confidence in the token’s mechanism. Within around a week, TerraUSD was trading at a fraction of its target. Meanwhile, its sister token, LUNA, collapsed over $100 to near zero.
TerraUSD price chart (Source: CoinGecko)
Those drops had wiped out between $40 billion to $45 billion from the ecosystem’s market cap.
What’s more, the collapse wasn’t an isolated event. It had sparked broader market turmoil in the middle of 2022, which resulted in a liquidity crunch and the subsequent downfall of several other firms.
Terraform went on to file for bankruptcy in 2024.
Earlier this month, Kwon was sentenced to 15 years in prison for his role in the ecosystem’s collapse after pleading guilty to two criminal counts in August.
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