- Terraform Labs’ liquidator alleges that Jump secretly supported UST while deceiving the markets.
- The court filing claims Jump realized billions from discounted Luna trades and timely exits.
- Jump denies wrongdoing as U.S. courts reexamine liability beyond Do Kwon.
The bankruptcy estate of Terraform Labs has filed an extensive lawsuit against trading powerhouse Jump Trading, accusing the firm and its executives of secretly manipulating the Terra ecosystem and extracting large profits as the project unraveled.
The court-appointed administrator overseeing Terraform’s liquidation is seeking $4 billion in damages, arguing that responsibility for one of cryptocurrency’s most catastrophic failures extends beyond founder Do Kwon.
The collapse that reshaped crypto
The lawsuit revisits the dramatic collapse of the TerraUSD stablecoin and its sister token LUNA in 2022.
Terraform Labs designed TerraUSD as an algorithmic stablecoin intended to maintain a one-dollar peg through market incentives rather than reserve backing.
When that mechanism failed, confidence evaporated almost overnight.
Within days, LUNA entered a death spiral and more than $40 billion in market value was wiped out, triggering reverberations across the digital asset industry.
The fallout contributed to subsequent failures at major crypto firms and hedge funds and deepened a sector-wide crisis of confidence.
Terraform Labs filed for bankruptcy in early 2024 and later agreed to pay roughly $4.5 billion to settle civil charges brought by the U.S. Securities and Exchange Commission (SEC).
Co-founder Do Kwon, who pleaded guilty to criminal charges, was recently sentenced to 15 years in prison.
Secret deals behind the scenes
According to the bankruptcy estate, the story did not end with Kwon.
Todd Snyder, the court-appointed liquidator overseeing Terraform’s shutdown, alleges that Jump Trading played a hidden and central role in propping up Terra long before its final collapse.
The complaint asserts that Jump and Terraform entered undisclosed agreements as early as 2019.
Under those agreements, Jump allegedly gained access to millions of LUNA tokens at steep discounts.
One contract cited in the filing reportedly allowed the firm to buy LUNA for roughly $0.40 per token, while the market price later topped $110.
The liquidator contends those deals set the stage for enormous gains once LUNA appreciated.
The suit also points to an informal “gentleman’s agreement” between Jump and Terraform.
Snyder alleges Jump quietly agreed to support TerraUSD’s peg during periods of market stress, while Terraform publicly credited any recoveries to the strength of its algorithm.
The agreement was reportedly concealed to avoid regulatory scrutiny and market attention.
Warning signs in May 2021
The lawsuit places special emphasis on events in May 2021, when TerraUSD briefly lost its dollar peg.
At the time, Terraform claimed the stablecoin’s rebound proved the resilience of its design. The new filing says a different reality was obscured.
Snyder alleges that Jump intervened by buying large quantities of TerraUSD, masking the protocol’s underlying weaknesses.
Investors, the complaint says, were misled into believing the mechanism functioned as intended.
After this episode exposed Terra’s design flaws, Jump allegedly negotiated the removal of vesting and lockup provisions from its agreements.
Those changes purportedly allowed the firm to receive monthly LUNA allocations and sell them immediately.
The liquidator says that accelerated selling pressure and enabled Jump to exit profitably as risks mounted.
Jump pushes back
Jump Trading has categorically denied the allegations and intends to vigorously defend itself.
A company spokesperson described the lawsuit as an attempt to shift blame away from Terraform Labs and Do Kwon.
Earlier in 2024 the SEC charged Jump’s crypto arm, Tai Mo Shan, with intervening during the May 2021 depeg and later profiting from sales of unlocked LUNA.
Tai Mo Shan resolved those claims for roughly $123 million without admitting wrongdoing.
During SEC testimony, executives including DiSomma and former Jump Crypto president Kanav Kariya repeatedly invoked their Fifth Amendment rights.
For Snyder, the current suit is about accountability. Even with Kwon behind bars, he argues, courts must still determine who knew what, who intervened, and who profited from Terra’s rise and collapse.