The court-appointed receiver managing Terraform Labs' bankruptcy proceedings has filed a new lawsuit regarding the Terra ecosystem crisis, one of the most devastating collapses in cryptocurrency market history. Receiver Todd Snyder is seeking approximately $4 billion in damages, accusing the high-frequency trading company Jump Trading of illegally profiting from and actively contributing to the TerraUSD (UST) collapse.
Allegations of a "secret agreement"
The lawsuit, reported by the Wall Street Journal, was filed in the U.S. Federal Court for the Northern District of Illinois. In addition to Jump Trading, the lawsuit names William DiSomma, one of the company's co-founders, and Kanav Kariya, head of the crypto trading unit, as defendants. Snyder argues that Jump exploited the Terraform Labs ecosystem through "manipulation, concealment, and conflicts of interest," leading to significant financial losses for thousands of investors. In 2022, Terraform Labs' algorithmic stablecoin, TerraUSD, collapsed within days after losing its dollar peg, and the ecosystem's native token, Luna, plummeted to near zero. The wiping out of approximately $40 billion in market capitalization triggered a crisis of confidence not only among individual investors but across the entire cryptocurrency sector. This process paved the way for chain bankruptcies, further deepened by the collapse of the FTX exchange later that year. According to court documents, secret agreements were made between Jump Trading and Terraform Labs starting in 2019.
These agreements allegedly involved Jump purchasing Luna tokens at prices far below market value, in some cases as low as 40 cents per token, and then freely selling these assets when prices rose above $100. Citing previous filings with the US Securities and Exchange Commission (SEC), Snyder claims Jump earned approximately $1 billion solely from Luna sales. The lawsuit also alleges that Jump was a party to a secret agreement, described as a "gentleman's agreement," to maintain TerraUSD's dollar peg. According to the allegations, in May 2021, when UST briefly fell below $1, Jump bought stablecoins from the market to drive the price up; however, this intervention was presented to the public as a success of Terraform's algorithmic structure. Snyder argues that this misled investors, creating the perception that the system was more robust than it actually was. Another notable claim in the lawsuit is that approximately 50,000 Bitcoins were transferred to Jump during the May 2022 crisis without any written contract. Furthermore, it is alleged that DiSomma sought emergency financing by contacting other trading companies as the crisis deepened, and that these actions accelerated the collapse. Jump Trading categorically denies the accusations. A company spokesperson stated that the lawsuit is an attempt to shift the blame for the crimes committed by Terraform Labs and its founder, Do Kwon, onto others. Jump stated that the allegations were baseless and that he would defend himself in court. Terraform Labs filed for bankruptcy in January 2024 and shortly after reached a settlement with the SEC for approximately $4.5 billion. The company's founder, Do Kwon, pleaded guilty to the charges and was sentenced last week to 15 years in prison.
