Jump Trading Hit by $4B Lawsuit Related to Terra’s $50B Collapse
Terraform Labs bankruptcy administrator Todd Snyder has filed a lawsuit seeking $4 billion in damages from trading company Jump Trading and several executives.
According to Friday's Wall Street Journal report, the lawsuit alleges that Jump Trading illegally profited and contributed to the 2022 Terra disaster. On the side of the company, the case is aimed at the entrepreneur William D'Soma and the former president of the department of crypto business, Kanav Kariya.
Terraform Labs and Terra blockchain ecosystem The TeraUSD (UST) collapsed in 2022 when the native algorithmic stable coin was devalued against the US dollar. The stablecoin was supported by Terra's inflation mechanism, and when the peg disappeared, the LUNA token saw a shock of selling and selling. The disaster caused nearly $50 billion in damages.
Snyder said in a filing that the filing “actively exploited” Terraform's ecosystem for fraud and self-dealing, and the lawsuit aims to recover losses from creditors and hurt investors, the WSJ reported.
Jump Trading did not immediately respond to Cointelegraph's request for comment. WSJ jumps at the accusation of treason.
Related: From TerraUSD to YU: Why Stablecoins Fail to Hold $1 and Risks Investors Can't Ignore
Suspected secret agreements and fraud
According to the report, the new lawsuit alleges that Jump and Terraform entered into a series of confidential agreements. The trading company will have the option to buy large amounts of LUNA at a steep discount as it is allowed to acquire millions of LUNA at $0.40 when trading above $110.
With the change, JumpTrading is expected to maintain TerraUSD's peg to the US dollar, masking errors in the algorithmic peg method. The lawsuit was also reportedly kept secret by a “gentleman's agreement” to avoid regulatory scrutiny. Following the initial switch event, the marketing company also stated that the pin was restored due to the technology, rather than disclosing its involvement.
According to the WSJ , the lawsuit was filed by Terraform founder and CEO Do Kwon and Karia, which was intended to protect the Luna Foundation's Guard Bitcoin (BTC) Reserve, TerraUSD from depegs. This firm transferred nearly 50,000 BTC to Jump Trading.
Coon pleaded guilty in August and was sentenced to 15 years in prison. In November, a US judge asked for a five-year sentence, while South Korean prosecutors had pushed for up to 40 years in prison.
Don't jump trading first charge on Terra
The case against Zali is not new. In May 2023 – and still ongoing – the lawsuit alleges that the trading company rigged the price of TerraUSD. In that case, the plaintiffs accused Leap of violating the Product Market Act and unfairly enriching it. The suit says so.
“Instead of publicly admitting that UST's announcement failed to maintain the peg price, TFL and Kwon secretly jumped in with the defendant to shift the market price to UST and aUST by secretly raising the syndicated trade to $1.”
A few months after the charges were filed, Kariya resigned amid reports of an investigation by the Commodity and Futures Trading Commission.
The company's involvement with Terra has attracted the attention of the US Securities and Exchange Commission. In the year By the end of 2024, Jump's wholly-owned subsidiary, Ty Mo Shan, had paid a $123 million settlement with the SEC for “misleading investors about the stability of TeraDollar.”
Related: Crypto exec to pay $10M to settle SEC claims over bets on TerraUSD
