Terraform Estate Sues Jump Trading for $4 Billion Over Secret ‘Bailout’ Deals
Terraform Labs’ bankruptcy administrator alleges Jump Trading made $1.28 billion by secretly propping up the UST peg in 2021, misleading investors about the algorithm’s stability.
The bankruptcy estate of Terraform Labs filed a $4 billion lawsuit against Jump Trading on Thursday, accusing the high-frequency trading firm of secretly propping up the Terra ecosystem to facilitate its own billion-dollar exit. The complaint, filed by court-appointed administrator Todd Snyder in the U.S. District Court for the Northern District of Illinois, names Jump, its co-founder William DiSomma, and former Jump Crypto president Kanav Kariya as defendants.
The lawsuit alleges Jump was not merely a passive market maker but an active participant in a scheme to mislead investors about the stability of TerraUSD (UST). Following the news, Terra Luna Classic (LUNC) drifted 3.5% lower to $0.000037, with volume remaining thin.
The ‘Dress Rehearsal’ Allegation
Central to the filing is the allegation that Jump secretly intervened during a UST de-pegging event in May 2021. A full year before the final collapse. Snyder claims Jump aggressively purchased UST to restore its $1 peg, creating a false narrative that the protocol’s algorithm was self-correcting. This artificial stability allegedly induced billions in fresh capital to enter the ecosystem.
Jump Trading actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing that enriched Jump while financially devastating thousands of unsuspecting investors.
The $1.28 Billion Payday
The estate claims the intervention came with a steep price tag. In exchange for the bailout, Do Kwon allegedly modified agreements to grant Jump 61.4 million LUNA tokens at a 99% discount, approximately $0.40 per token when the market price traded as high as $90. The filing asserts Jump then dumped these tokens into the retail market, generating a $1.28 billion profit.
This follows a pattern of scrutiny surrounding Jump’s crypto operations. Kariya resigned in June 2024 amid related regulatory probes, and the firm has largely retreated from its once-dominant position in digital asset market making.
Institutional Liability
The lawsuit seeks to reclaim these profits under bankruptcy avoidance laws, arguing the transfers were fraudulent. If successful, the case could set a precedent for clawing back market maker profits in failed protocols, piercing the veil of “neutral liquidity provision” when undisclosed agreements materially alter token economics. Jump has not yet issued a public response to the filing.
