Jump Trading faces a $4B lawsuit from Terraform Labs’ liquidator, accused of secret deals and market manipulation that led to a $1.28B profit before the ecosystem’s implosion.
By Hamza Tariq
Editor Yana Khlebnikova
Updated
3 mins read
Terraform Labs’ court-appointed liquidator, Todd Snyder, has filed a $4 billion lawsuit against Jump Trading, its co-founder William DiSomma, and former president Kanav Kariya.
The suit, filed in an Illinois district court, alleges the high-frequency trading firm secretly manipulated the TerraUSD (UST) stablecoin for massive profits before its $40 billion collapse in May 2022.
The core of the complaint alleges Jump entered a clandestine agreement to artificially support UST’s price, misleading investors about its stability.
The lawsuit claims that when UST first lost its peg in May 2021, Jump Trading covertly bought large amounts of the token to restore its price.
This action, the filing argues, was falsely portrayed by Terraform Labs as a natural recovery by its algorithm.
“This action is a necessary step to hold Jump Trading accountable for illegal conduct that directly caused the largest crypto collapse in history,” Snyder stated, according to reports.
The Office of the Terraform Labs Plan Administrator has filed a $4B lawsuit against Jump Trading over its direct role in the collapse of Terraform Labs, seeking to hold Jump to account for enriching itself through illicit market manipulation, self-dealing, and misuse of assets.…
— Terra 🌍 Powered by LUNA 🌕 (@terra_money) December 19, 2025
In exchange for the intervention, Terraform Labs allegedly modified a prior agreement, allowing Jump to purchase LUNA LUNA $0.11 24h volatility: 2.3% Market cap: $75.76 M Vol. 24h: $76.32 M tokens at a staggering 99% discount.
The suit claims Jump acquired LUNA for as low as $0.40 when the market price was over $90, later selling the tokens for a reported profit of $1.28 billion.
This legal action follows previous findings by the U.S. Securities and Exchange Commission (SEC). In December 2024, the SEC charged Jump’s subsidiary, Tai Mo Shan Ltd., with misleading investors about UST’s stability.
Jump settled that case for $123 million without admitting or denying the findings. The SEC’s investigation highlighted the same May 2021 de-peg event, concluding that Jump’s intervention was incentivized by the discounted LUNA deal.
A spokesperson for Jump called the new lawsuit a “desperate attempt” to shift blame from Terraform Labs and its founder, Do Kwon, and stated the firm would defend itself vigorously.
The original Terra (LUNA) token has since been rebranded to Terra Classic LUNC $0.000040 24h volatility: 4.9% Market cap: $219.67 M Vol. 24h: $59.12 M , while a new token, Terra (LUNA), trades at approximately $0.11, down nearly 2% over the past 24 hours.
Terraform Labs co-founder Do Kwon was recently sentenced to 15 years in a U.S. federal prison by Judge Paul A. Engelmayer for his role in the $40 billion Terra/Luna collapse.
While the lawsuit targets Jump, its implications extend to the entire market-making sector in crypto. The case scrutinizes the thin line between providing liquidity and active market manipulation.
For institutional traders, this lawsuit is a critical test of legal liability for firms that may have profited from undisclosed, preferential deals that masked fundamental protocol flaws.
The outcome could set a precedent for how much responsibility market makers bear when a project they support collapses, potentially forcing greater transparency in their agreements with token issuers.
Do Kwon may still face a separate trial in South Korea, where he could receive up to 30 years in prison if extradited and found guilty.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Hamza is an experienced crypto editor/writer with a deep understanding of blockchain technology, cryptocurrency markets, and digital finance. He is passionate about making complex topics accessible and helping readers navigate the fast-evolving world of crypto.