Terraform Estate Sues Jump Trading for $4B; Alleges $1.28B ‘Secret Profit’

The bankruptcy estate for Terraform Labs filed a $4 billion lawsuit against Jump Trading on Thursday, accusing the high-frequency trading firm of engineering a “secret agreement” that artificially propped up the Terra ecosystem before accelerating its $40 billion collapse.

Todd Snyder, the court-appointed plan administrator, filed the complaint in the U.S. District Court for the Northern District of Illinois. The filing names Jump Trading, its co-founder William DiSomma, and former Jump Crypto President Kanav Kariya as defendants, seeking to claw back illicit profits allegedly made while retail investors were wiped out.

The ‘Gentlemen’s Agreement’

The lawsuit targets a specific mechanism of the collapse: a clandestine deal struck to restore TerraUSD’s (UST) peg during a preliminary crisis in May 2021. According to the complaint, Jump intervened to buy massive quantities of UST to restore its $1 parity. In exchange, Terraform Labs allegedly modified prior agreements to transfer 61.4 million LUNA tokens to Jump at a 99% discount.

Snyder’s filing details that Jump acquired LUNA for as little as $0.40 per token while it traded above $90 on public markets. The estate alleges Jump then aggressively sold these tokens into the market, generating approximately $1.28 billion in profit while effectively using retail liquidity as exit liquidity.

“Jump Trading actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing that enriched Jump while financially devastating thousands of unsuspecting investors,” Snyder stated.

The 50,000 BTC Transfer

Beyond the token discounts, the estate claims improper asset transfers occurred during the terminal collapse in May 2022. The complaint alleges nearly 50,000 Bitcoin, worth approximately $1.5 billion at the time, was transferred from the Luna Foundation Guard (LFG) to Jump without any written agreement governing the funds’ use. The administrator characterizes this as a direct misuse of assets meant to defend the peg.

Institutional Fallout

This lawsuit escalates the accountability phase for crypto market makers. While Jump’s subsidiary, Tai Mo Shan Ltd., settled with the SEC for $123 million in December 2024 regarding misleading statements about UST, this civil action seeks damages orders of magnitude larger. The move follows the sentencing of Terraform founder Do Kwon to 15 years in prison earlier this month.

A Jump Trading spokesperson dismissed the filing as a “desperate attempt” to shift blame from Kwon’s fraud, stating the firm intends to vigorously defend itself. LUNA (Terra 2.0) traded flat at $0.11 following the news, while the defunct LUNC remained suppressed at $0.000040.