Terraform Labs has filed a major lawsuit against US based trading firm Jump Trading and several of its senior executives seeking $4 billion in damages. The case is linked to the dramatic collapse of the Terra blockchain ecosystem in 2022 which wiped out nearly $50 billion in market value according to a report by The Wall Street Journal.
The legal action has been initiated by Todd Snyder who is overseeing Terraform Labs’ bankruptcy process. The lawsuit accuses Jump Trading of manipulating the Terra ecosystem and secretly profiting from its failure while contributing to the scale of losses suffered by investors.
Allegations linked to Terra crash
The Terra ecosystem collapsed in 2022 after its algorithmic stablecoin TerraUSD lost its one dollar peg. The peg relied on a mint and burn mechanism involving the LUNA token. When confidence broke LUNA supply surged rapidly and its price crashed causing widespread losses across the crypto market.
In the lawsuit Snyder alleges that Jump Trading actively exploited weaknesses in the Terra system through manipulation and self dealing. The filing claims the firm’s actions worsened the crash and allowed it to profit while ordinary investors and creditors suffered heavy losses.
Along with Jump Trading the lawsuit names its co founder William DiSomma and Kanav Kariya who previously led the firm’s crypto trading operations.
Claims of secret agreements
According to the Wall Street Journal the lawsuit centres on alleged secret arrangements between Terraform Labs and Jump Trading. These agreements reportedly allowed Jump to purchase large volumes of LUNA at heavily discounted prices. The suit claims Jump was able to buy millions of LUNA tokens at around forty cents while the market price exceeded one hundred dollars.
In return Jump was allegedly expected to support TerraUSD’s peg to the dollar during periods of stress. This support would have masked fundamental flaws in the algorithmic stablecoin design and created a false sense of stability in the market.
The lawsuit further claims that this arrangement was kept informal and unwritten as a so called gentlemen’s agreement to avoid regulatory attention. After an early depegging event Jump allegedly portrayed the recovery as a success of the Terra mechanism rather than disclosing its own intervention.
Bitcoin reserves and role of executives
The filing also raises questions about the use of Bitcoin reserves held by the Luna Foundation Guard which was established to defend TerraUSD during market shocks. According to the lawsuit decisions over these reserves were directed by Terraform founder Do Kwon together with Jump executive Kanav Kariya.
The suit alleges that nearly fifty thousand Bitcoin were transferred to Jump Trading without any written agreement setting out how the funds would be used. This lack of documentation is presented as further evidence of opaque dealings that may have contributed to investor losses.
Do Kwon has since pleaded guilty in the United States and was sentenced earlier this month to fifteen years in prison. Prosecutors in South Korea are reportedly seeking a much longer sentence in a separate case.
Jump’s response and prior legal actions
Jump Trading has denied the allegations according to the Wall Street Journal and did not immediately comment publicly following the filing of the new lawsuit.
This is not the first time Jump has faced legal scrutiny over its involvement with Terra. A separate lawsuit filed in May 2023 accused the firm of manipulating the price of TerraUSD in violation of US commodities law. That case remains ongoing.
Regulators have also taken action. In late 2024 Jump subsidiary Tai Mo Shan agreed to pay a $123 million settlement to the US Securities and Exchange Commission over claims it misled investors about the stability of TerraUSD.
The outcome of the latest lawsuit could have significant implications for how trading firms engage with crypto projects and for ongoing efforts to recover funds for those affected by one of the largest collapses in digital asset history.
