.jpeg)
The administrator overseeing the liquidation of Terraform Labs has filed a massive $4 billion lawsuit against crypto market maker Jump Trading. The suit alleges that Jump Trading played a direct role in the collapse of the Terra ecosystem, enriching itself through illicit market manipulation and self-dealing, ultimately leading to devastating financial losses for thousands of investors.
Key Takeaways
-
Terraform Labs' liquidator, Todd Snyder, is suing Jump Trading for $4 billion.
-
The lawsuit alleges Jump Trading engaged in market manipulation and self-dealing that contributed to Terra's collapse.
-
Secret agreements between Jump Trading and Terraform are cited as evidence.
-
Jump Trading denies the allegations, calling the lawsuit a "desperate attempt" to shift blame.
Allegations of Direct Involvement
Todd Snyder, the plan administrator for the Terraform bankruptcy, has accused Jump Trading, its co-founder William DiSomma, and former crypto division president Kanav Kariya of directly contributing to the downfall of Do Kwon's company. The lawsuit claims Jump Trading "actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing that enriched Jump while financially devastating thousands of unsuspecting investors."
Secret Agreements and Market Manipulation
Court documents reveal that since 2019, secret agreements existed between Jump Trading and Terraform. One such agreement allegedly allowed Jump to purchase LUNA at a significantly reduced price of $0.4 when the market price was as high as $110. Furthermore, Jump Trading is accused of having an informal agreement to artificially support the TerraUSD (UST) stablecoin's peg to the dollar, concealing these actions from regulators and the community.
When UST lost its peg in May 2021, Jump Trading allegedly intervened by purchasing UST to restore its value, misleading investors into believing the algorithm was responsible for the recovery. The lawsuit further claims that once the stablecoin's vulnerability was known, Jump Trading secured the removal of vesting periods in contracts, enabling them to sell LUNA monthly and profit, thereby exacerbating pressure on the token.
Exploiting the Collapse
Following the initial stablecoin failure, the Luna Foundation Guard's Bitcoin reserve was established under the control of Kwon and Kariya. When UST collapsed again in May 2022, nearly 50,000 BTC (approximately $1.5 billion at the time) were transferred from this reserve without clear written agreements. The lawsuit suggests that DiSomma's attempts to salvage the situation by seeking liquidity from other crypto companies backfired, as competitors began selling TerraUSD and Luna upon learning of the project's issues.
Jump Trading's Response and Past Settlements
A representative for Jump Trading issued a statement calling the lawsuit a "desperate attempt by Terraform Labs to shift blame and financial responsibility from the crimes committed by Do Kwon. We will vigorously defend against these baseless allegations." This legal action follows a separate settlement in December 2024, where Jump's subsidiary, Tai Mo Shan, paid $123 million to resolve claims related to transactions with Terraform in 2021. In 2023, the U.S. Securities and Exchange Commission (SEC) also brought similar accusations, stating Jump Trading earned approximately $1 billion from transactions involving UST.
Broader Impact and Legal Ramifications
The collapse of TerraUSD and LUNA in May 2022 wiped out an estimated $40 billion in value, triggering a wider market downturn and leading to the failures of several major crypto firms, including Three Arrows Capital. Do Kwon was sentenced to 15 years in prison in December 2025 after pleading guilty to fraud charges.
Sources
-
Jump Trading Accused of Direct Involvement in Terra’s Collapse, ForkLog.
-
Jump Trading Sued for $4 Billion Over Terra Collapse, Phemex.
-
Todd Snyder Files $4 Billion Lawsuit Against Jump Trading Amid Crypto Turmoil, Value The Markets.
-
Terraform Liquidators Allege Jump Trading Helped Fuel Crypto’s Biggest Crash: Report, Yahoo Finance.
This article was created with support from AI-driven technology, drawing on multiple reputable sources. The final content has been thoroughly reviewed and edited by BlockzHub's editorial team to ensure accuracy, clarity, and coherence. Original reporting sources are credited whenever appropriate and as required. The opinions expressed in this article do not necessarily represent the official views or positions of BlockzHub. This article is intended for informational purposes only and should not be considered financial or professional advice. Investing involves risk, and you should consult a qualified financial advisor before making any investment decisions.