The court-appointed administrator for bankrupt Terraform Labs has filed a $4 billion lawsuit against Jump Trading, alleging that the Chicago firm secretly propped up TerraUSD’s peg in 2021 and then cashed out on discounted LUNA while investors misread the risk profile of the system.
The complaint, filed by plan administrator Todd Snyder in federal court in Illinois, claims that Jump entered a series of side deals with Terraform starting in late 2019 that let it buy LUNA at steep discounts while acting as a market maker for both LUNA and UST. Those arrangements allegedly set the stage for a covert rescue in May 2021 when UST slipped roughly 10% off its dollar peg, about a year before the protocol’s $40 billion collapse. A Wall Street Journal report first flagged the new filing, citing the $4 billion damages figure and Jump’s named executives William DiSomma and former Jump Crypto president Kanav Kariya.
May 2021: Quiet rescue, loud narrative
According to the lawsuit, UST’s first serious wobble on May 19, 2021 did not resolve through the advertised algorithmic arbitrage. Instead, the administrator alleges that Do Kwon and Jump coordinated large, off-exchange UST purchases through Jump affiliates to haul the price back to $1. Court papers say Kwon and Jump executives were in close contact on May 23, 2021 as Jump bought size across the market, restoring the peg and stabilizing aUST on Anchor. Reporting from Blockworks notes that the complaint describes this as a deliberate scheme to “artificially inflate” UST and aUST prices.
Public messaging from Terraform framed the episode as a real-world stress test that the algorithm passed. That narrative already came under regulatory fire. In a separate action, the U.S. Securities and Exchange Commission detailed how a Jump affiliate quietly spent about $20 million during the May 2021 depeg while Kwon touted a supposed black-swan survival. The SEC’s findings led Jump unit Tai Mo Shan to agree to pay roughly $123 million in disgorgement and penalties over its UST support trades, according to a consent deal reported by The Block.
Discounted LUNA, billion-dollar upside
The Terraform estate now leans on that same May 2021 playbook to press a broader claim. Snyder alleges that Jump used its privileged relationship with Terraform to secure LUNA at prices far below market. One agreement reportedly let Jump buy LUNA for about $0.40 per token while the market later traded above $110. Coverage of the complaint by CoinCentral and Coinpaper notes that the filing pegs Jump’s profits from these arrangements in the billions of dollars.
Vesting terms also sit at the center of the dispute. The estate claims Jump pushed to strip vesting and lockups after the May 2021 incident exposed how fragile the peg really was. Once those restrictions came off, Jump allegedly received monthly LUNA installments that it could dump directly into a market that still believed in UST’s algorithmic defense.
“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 in language cited by CoinCentral’s report.
50,000 BTC transfer and a $4B ask
The lawsuit also drags the 2022 death spiral into view. The Luna Foundation Guard created a reserve war chest of bitcoin and other assets after the first depeg. According to the new complaint, LFG transferred nearly 50,000 BTC to Jump during the final unwind in May 2022 without a written agreement dictating how Jump should deploy those reserves. Both BanklessTimes and The Block highlight that transfer as an example of alleged self-serving conduct with assets meant to defend UST.
Snyder’s office seeks up to $4 billion in damages. The theory is straightforward. If Jump’s undisclosed peg support in 2021 and its preferential LUNA deals distorted the market and helped draw fresh capital into a system that later imploded, then creditors should claw back what the estate describes as ill-gotten gains. Terraform itself agreed earlier this year to a roughly $4.47 billion settlement with the SEC after a jury found the company and Kwon liable for civil fraud. The administrator now aims to add Jump’s alleged haul to the recovery pool.
Jump pushes back, Terra tokens trade on
Jump has rejected the allegations. A spokesperson called the lawsuit a “desperate attempt” to deflect blame for the crimes of Do Kwon and Terraform, according to statements quoted by The Block and other outlets. The firm pledged to fight the case in court.
The action lands as courts finish handing down penalties tied to Terra. Kwon faces a 15-year U.S. prison sentence. Terraform sits in Chapter 11 with about $300 million recovered so far for creditors, based on figures cited in the Journal’s coverage. The Jump complaint raises a fresh question for traders. How much of the 2021 LUNA rally and UST stability came from organic demand and how much came from a single trading firm sitting behind the curtain.
