The bankruptcy estate of Terraform Labs (TFL) has filed a $4 billion lawsuit against high-frequency trading giant Jump Trading, alleging the firm illegally profited from the Terra network’s collapse through secret agreements and market manipulation. The complaint, filed by plan administrator Todd Snyder in the U.S. District Court for the Northern District of Illinois, names Jump Trading, its co-founder William DiSomma, and former Jump Crypto President Kanav Kariya as defendants.
The Allegation: Profit From Panic
The lawsuit contends that Jump Trading was not merely a neutral market maker but an active participant in a scheme to artificially prop up the TerraUSD (UST) peg. According to the filing, TFL and Jump entered into a clandestine arrangement following a minor de-peg event in May 2021.
The estate alleges that Jump agreed to purchase large quantities of UST to restore its $1 parity. In exchange, TFL allegedly modified agreements to sell Jump tens of millions of LUNA tokens at a 99% discount, acquiring them for roughly $0.40 when market prices exceeded $90. Jump reportedly generated over $1 billion in profit by dumping these discounted tokens on retail investors who believed the peg had been restored by the algorithm’s design rather than human intervention.
The complaint asserts: "Jump actively exploited the Terraform Labs enterprise… entering into a backdoor deal to inflate the value of UST before it imploded."
The 50,000 Bitcoin Transfer
The filing also scrutinizes the final days of the Terra collapse in May 2022. It highlights a transfer of approximately 50,000 Bitcoin (worth billions at the time) from the Luna Foundation Guard (LFG) to Jump Trading. The estate claims this transfer occurred without a formal agreement, characterizing it as a panicked attempt to save the peg that ultimately enriched Jump while TFL’s creditors were wiped out.
Market & Institutional Context
This lawsuit represents the latest escalation in the post-mortem of the 2022 crypto credit crisis. While Terraform Labs founder Do Kwon faces criminal sentencing, the bankruptcy estate is focused on clawing back assets for creditors. Jump Trading previously settled with the SEC for $123 million in 2024 regarding similar allegations of misleading conduct, without admitting or denying guilt. That settlement disgorged profits specifically related to the May 2021 de-peg intervention.
Market reaction for the remnant tokens was muted, with Terra Classic (LUNC) trading flat at $0.000038 and USTC drifting lower to $0.007 (-1.6%), reflecting their status as speculative assets decoupled from the legal battle.
