Jump Trading, a proprietary trading firm has been sued for $4 billion on allegations of having played a role in the crash of the TerraUSD token and its sister crypto Luna back in 2022. Todd Snyder, the court-appointed administrator of Terraform Labs’ bankruptcy plan, has accused Jump Trading of manipulating the Terra ecosystem that led to its collapse.
According to the lawsuit, Jump Trading entered a secret “gentlemen’s agreement” to artificially maintain TerraUSD’s dollar peg. The aim of this agreement was to conceal any flaws in Terra’s algorithmic mechanism to avoid regulatory scrutiny, a report by the Wall Street Journal said on Friday, December 19.
As part of this arrangement, Chicago-based Jump Trading was given the allowance to acquire millions of LUNA tokens at around $0.40 when the token retailed at over $110, the report noted.
Jump co-founder William DiSomma and former senior executive Kanav Kariya have also been dragged into the lawsuit that says that after the TerraUSD token was depegged against the USD, Jump misled Terraform and did not warn of chances of collapse.
Between $40 billion to $50 billion were recorded in losses as a result of the Terra collapse. Snyder, through this lawsuit, is looking to rope-in capital to reimburse investors who encountered losses as part of the collapse.
The WSJ report said Jump Trading has refuted the allegations. A public statement from the company, however, remains awaited for now. The news has spread like wildfire within the crypto community.
The development comes a week after Terraform founder Do Kwon was sentenced to fifteen years in prison in the U.S. Kwon, 33, also faces a 40-year prison sentence in South Korea owing to his fraudulent business practices. Kwon was arrested in Europe back in March 2023, caught travelling on a false passport.
For now, an exact timeline by when Terraform creditors would get their reimbursements back remains unclear. Its bankruptcy process started in January 2024 and in March this year, the creditors were asked to file their claims.