- The liquidator of Terraform Labs alleges that Jump secretly propped up UST and misled the markets.
- Court filings claim Jump realized billions through discounted LUNA deals and early exits.
- Jump denies wrongdoing while U.S. courts again examine accountability beyond Do Kwon.
The insolvency estate of Terraform Labs has filed a comprehensive lawsuit against market powerhouse Jump Trading, accusing the firm and its executives of secretly manipulating the Terra ecosystem and profiting as the project unraveled.
The court-appointed administrator overseeing Terraform’s liquidation is seeking $4 billion in damages, arguing that responsibility for one of the most destructive crypto failures extends far beyond founder Do Kwon.
A collapse that reshaped crypto
The lawsuit revisits the dramatic collapse of TerraUSD and its sister token LUNA in 2022.
Terraform Labs built TerraUSD as an algorithmic stablecoin intended to maintain a one-dollar peg through trading incentives rather than backing it with reserves.
When that mechanism failed, confidence evaporated almost overnight.
Within days LUNA entered a death spiral and over $40 billion of market value was wiped out, shaking the digital-asset industry.
The fallout contributed to subsequent failures at major crypto lenders and hedge funds and deepened a sector-wide confidence crisis.
Terraform Labs filed for bankruptcy in early 2024 and later agreed to pay about $4.5 billion to resolve civil charges brought by the U.S. Securities and Exchange Commission (SEC).
Do Kwon, the company’s co-founder, pleaded guilty and was recently sentenced to 15 years in prison.
Secret dealings behind the scenes
According to the insolvency estate, the story did not end with Kwon.
Todd Snyder, the court-appointed liquidator leading Terraform’s wind-down, asserts that Jump Trading played a hidden, central role propping up Terra long before its final collapse.
Court filings allege Jump and Terraform entered undisclosed agreements as early as 2019.
Under those arrangements, Jump is said to have gained access to millions of LUNA tokens at steep discounts.
A contract cited in the complaint allegedly allowed Jump to buy LUNA for roughly $0.40 per token if the market later climbed above $110.
The administrator contends these deals laid the groundwork for massive gains when LUNA’s price rose.
The complaint also points to an informal “gentlemen’s agreement” between Jump and Terraform.
Snyder alleges Jump secretly agreed to support TerraUSD’s peg during stress periods while Terraform publicly credited any recoveries to the strength of its algorithm.
Those arrangements were allegedly concealed to avoid regulatory scrutiny and market oversight.
The warning signs in May 2021
The complaint places particular emphasis on May 2021, when TerraUSD briefly lost its dollar peg.
At the time, Terraform argued that the recovery proved the resilience of its design. The lawsuit now paints a different picture.
Snyder alleges Jump intervened by buying large quantities of TerraUSD, masking fundamental weaknesses in the system.
Investors, he argues, were misled into believing the mechanism functioned as intended.
After that episode revealed design flaws, Jump purportedly negotiated to remove vesting and lockup provisions from contracts.
Those changes allegedly allowed the firm to receive monthly LUNA allocations and sell them immediately.
The administrator says this increased selling pressure and positioned Jump to profitably exit as risks rose.
Jump pushes back
Jump Trading has categorically denied the allegations and says it will vigorously defend itself.
A company spokesperson called the lawsuit an attempt to shift blame away from Terraform Labs and Do Kwon.
Earlier in 2024 the SEC accused Jump’s crypto unit, Tai Mo Shan, of intervening during the May 2021 depeg and later benefiting from unlocked LUNA sales.
Tai Mo Shan settled those claims for about $123 million without admitting wrongdoing.
During SEC proceedings, both DiSomma and former Jump crypto president Kanav Kariya repeatedly invoked their Fifth Amendment rights.
For Snyder, the current lawsuit is about accountability. Even with Kwon behind bars, he argues the courts must continue to determine who knew what, who intervened, and who ultimately profited from Terra’s rise and fall.