Terraform Estate Sues Jump Trading for $4B; Alleges ‘Shadow’ Peg Defense
Terraform Labs’ bankruptcy estate seeks $4 billion from Jump Trading, alleging secret deals and a $1.28 billion profit scheme behind the UST collapse.
The bankruptcy administrator for Terraform Labs (TFL) filed a $4 billion lawsuit against Jump Trading today, alleging the high-frequency trading firm was not a neutral market maker but a secret partner in propping up the failed TerraUSD (UST) stablecoin. The filing accuses Jump of extracting billions in profit through undisclosed agreements while public investors were wiped out.
The ‘Gentlemen’s Agreement’
Todd Snyder, the court-appointed administrator, claims Jump Trading and its executives, including former crypto president Kanav Kariya, executed a massive deception during the May 2021 de-pegging event. A precursor to the final 2022 collapse.
When UST lost its $1.00 peg in May 2021, TFL publicly claimed its algorithmic mechanism self-healed. The lawsuit asserts a different reality: Jump Trading secretly purchased over 62 million UST to restore the price artificially.
In exchange, TFL allegedly modified agreements to sell Jump millions of LUNA tokens at a 99% discount. Reports indicate Jump acquired LUNA for as little as $0.40 while it traded publicly above $90. The firm allegedly netted $1.28 billion in profit from these trades.
The complaint alleges Jump “actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing.”
The 50,000 BTC Transfer
The filing also targets the chaotic final days of Terra in May 2022. It alleges the Luna Foundation Guard (LFG) transferred nearly 50,000 Bitcoin, worth ~$1.5 billion at the time, to Jump Trading wallets.
Crucially, the administrator states there was no written agreement governing this transfer. The suit characterizes this as a looting of assets that should have been used to defend the peg or compensate creditors, rather than facilitating Jump’s exit.
Institutional Liability
This lawsuit escalates the scrutiny on market makers in DeFi. By labeling the relationship as “shadow trading,” the estate is challenging the standard defense of “neutral liquidity provision.” Jump Trading, which has already settled with the SEC for $123 million regarding similar allegations, has denied the new claims, calling them a “desperate attempt” to shift blame from convicted founder Do Kwon.
