Terraform Labs administrator files $4 billion lawsuit against Jump Trading, alleging market manipulation, concealed profits, and contribution to Terra’s collapse.
The administrator overseeing the wind-down of Terraform Labs has filed a major lawsuit against Jump Trading. The filing accuses the company of illegal profits and manipulation that were linked to the collapse of Terra. The suit is seeking $4 billion in damages from Jump Trading. It has also named co-founder William DiSomma and former head of crypto Kanav Kariya.
Lawsuit Alleges Market Manipulation During UST De-Peg Events
According to a Wall Street Journal report, the administrator filed the complaint in bankruptcy proceedings. The lawsuit focuses on TerraUSD’s frequent de-pegging in 2021 and 2022. During those times, Jump is said to have acted secretly in the market. Consequently, the filing asserts that such acts distorted public price signals.
The complaint charges that Jump made huge undisclosed purchases of UST. These purchases reportedly occurred whenever UST was trading below the one dollar peg. As a result, prices were temporarily stabilized. However, argues the filing, this stability was artificial. That is why investors were supposedly given a distorted impression of market demand.
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Furthermore, the lawsuit alleges that Jump’s trading activity overestimated the value of UST. By doing so, according to the firm, it delayed an inevitable collapse. According to the administrator, these interventions were not defensive. Instead, they supposedly developed a calculated strategy for pulling out profits.
The filing estimates Jump made a profit of about $1 billion from the scheme. These gains allegedly were from volatility Jump helped manage privately. As a result, the lawsuit defines the conduct not as market making but as manipulation. The administrator contends that this behavior made the ecosystem more systemic risk.
Snyder’s filing describes Jump’s actions as ones of concealment and deception. It asserts the firm got rich and risked retail investors to increasing losses. Therefore, the lawsuit makes Jump a central contributor to Terra’s downfall. The complaint states that the collapse was accelerated by these hidden interventions.
Terra Collapse Fallout and Expanding Legal Pressure
The Terra ecosystem collapsed dramatically in May 2022. At its peak, the failure eliminated an estimated $40 billion in market value. Moreover, the event caused currency contagion across the crypto markets. Several funds, lenders, and retail investors had suffered severe losses.
Jump Trading has not publicly commented on the new lawsuit. Meanwhile, DiSomma and Kariya previously raised Fifth Amendment protections. These invocations took place during related regulatory investigations. On top of that, Kariya resigned from Jump Trading this past year.
The case adds to growing legal pressure over Terra-related activities. In December of 2024, a subsidiary of Jump settled with the SEC. That agreement involved a $123 million payoff. Misleading statements about TerraUSD’s stability, according to regulators.
Therefore, the new lawsuit increases the potential financial exposure for Jump significantly. The $4 billion damages claim is far more than previous settlements. It also highlights the attention of the regulators and creditors on the third-party actors. Increasingly, market intermediaries are being scrutinized for their roles in times of crisis.
The administrator claims accountability is still vital to creditor recovery. By suing Jump, the estate is trying to reclaim the losses of the investors. Moreover, the purpose of the lawsuit is to discourage other similar activities across crypto markets. Such cases may alter market-making standards, legal experts point out.
Meanwhile, Terra founder Do Kwon is facing criminal and civil proceedings. His crypto empire’s collapse is still one of the largest failures in the industry. Consequently, this lawsuit is another chapter in fallout that continues. It sheds light on the ongoing attraction of alleged behind-the-scenes trading to the attention of the law.
Source: https://www.livebitcoinnews.com/terraform-labs-administrator-sues-jump-trading-seeks-4b-in-damages/
