Terraform Labs’ court-appointed liquidator has filed a $4 billion lawsuit against high-frequency trading firm Jump Trading LLC and two of its top executives, alleging they unlawfully profited and contributed to the 2022 collapse of the TerraUSD stablecoin and its sister token Luna.
The complaint was filed by Todd Snyder, the administrator overseeing the liquidation of Terraform Labs, in the U.S. District Court for the Northern District of Illinois. It claims that Jump and its co-founder William DiSomma and former Jump Crypto president Kanav Kariya reaped billions in gains through undisclosed deals that allegedly distorted the Terra ecosystem.
Key Allegations Against Jump Trading
According to court filings, the lawsuit focuses on a series of secret agreements dating back to 2019, under which Jump was granted privileged access to Luna tokens at significantly discounted prices in one case acquiring tokens for $0.40 each before they later traded above $110.
The complaint asserts that these arrangements allowed Jump to accumulate large positions that it later sold for substantial profits. Terraform Labs also alleges that Jump entered a quiet “agreement” to support the TerraUSD (UST) peg during stress events, such as the May 2021 depeg, with Jump’s purchases artificially propping up the stablecoin rather than its algorithm functioning as marketed publicly.
The lawsuit further accuses Jump of renegotiating contracts to remove vesting restrictions, enabling it to receive and sell Luna tokens on the open market without customary lockup periods
Collapse of TerraUSD and Market Fallout
The Terraform ecosystem unraveled in May 2022 when TerraUSD lost its dollar peg and entered a death spiral, followed by Luna’s price collapsing from highs to near zero within days. The implosion wiped out an estimated $40 billion $45 billion in market value, hurting retail investors and contributing to broader stress in the crypto lending landscape.
During the final stages of the collapse, nearly 50,000 bitcoin were allegedly transferred from Luna Foundation Guard to Jump without a formal agreement on their use a transaction the lawsuit says exemplifies self-dealing and misuse of assets.
Prior regulatory actions had already implicated Jump in related conduct. In 2024, Tai Mo Shan, a Jump Crypto unit, agreed to pay $123 million in fines to the SEC linked to its role in supporting TerraUSD’s peg during prior volatility, though without admitting wrongdoing.
Claims of Market Misleading and Profits
The lawsuit echoes allegations previously highlighted in SEC findings, which suggested Jump’s crypto unit profited approximately $1.28 billion by selling Luna tokens from early access arrangements. Jump’s critics contend that the trading firm’s interventions misled investors into believing Terra’s algorithmic design was robust when in reality outside buying power masked vulnerabilities.
So far, Terraform’s estate has recovered around $300 million in assets to distribute to creditors, but the $4 billion claim seeks a much larger judgment to compensate for the broader damage to investors and the ecosystem.
A spokesperson for Jump Trading called the lawsuit a “desperate attempt” to shift blame away from Terraform’s own failures and said the firm plans to defend itself vigorously against the claims.
Why This Matters
The legal action underscores growing scrutiny over the role that market participants and intermediaries play in decentralized finance and algorithmic ecosystems. As crypto markets mature, questions about transparency, disclosure and accountability have shifted from hypothetical concerns to courtroom reality.
The outcome of this case could influence future standards for agreements between trading firms and blockchain project teams, particularly where undisclosed arrangements may affect market pricing and investor perceptions.
