Terraform administrator sues Jump Trading for $4bn

The administrator charged with steering Terraform Labs through bankruptcy has sued Jump Trading, the Chicago-based firm that played an outsize role in the collapse of the Terra blockchain in 2022.

Todd Snyder, who was confirmed to lead the Terraform Labs Wind Down Trust in September 2024, had accused Jump, several of its subsidiaries, and two of its executives of market manipulation, defrauding investors, self-dealing, and more.

“The Office of the Terraform Labs Plan Administrator has filed a $4B lawsuit against Jump Trading over its direct role in the collapse of Terraform Labs, seeking to hold Jump to account,” the administrator said in a post on X on Thursday.

“The action aims to recover value for creditors and hold Jump responsible for exploiting the ecosystem, leaving unsuspecting investors to bear the losses.”

Last week, Terra founder Do Kwon was sentenced to 15 years in prison in connection with Terra’s collapse. He had pleaded guilty to defrauding investors, in part by touting Terra’s UST stablecoin as secure by design even though it had nearly failed in 2021.

The stablecoin only survived that near-death experience due to substantial intervention by Jump Trading — an effort that Kwon and Jump executives kept secret, even as Terra and its cryptocurrencies grew at breakneck speed.

When Terra collapsed a year later, it vaporized some $40 billion, devastating retail investors around the world and setting off a chain reaction that drove several multibillion dollar crypto firms into bankruptcy.

While Kwon begins a lengthy prison sentence, the Jump executives who allegedly helped him perpetuate his fraud have evaded accountability, according to Thursday’s lawsuit.

“This case is about a secretive trading firm that defrauded investors and contributed to one of the largest cryptocurrency collapses in history,” it reads. “This lawsuit is how the estate of Terraform and the victims of Jump’s wrongful conduct will finally hold Jump responsible.”

Jump subsidiary Tai Mo Shan paid a $123 million fine after settling with the US Securities and Exchange Commission in 2024. But that’s far less than the $4 billion in fines Terraform and Kwon were ordered to pay after losing a separate lawsuit brought by the SEC that year.

Jump Trading has a storied history in Chicago, where it was founded in 1999 by derivatives pit traders. It’s a leading firm in the secretive world of high-speed trading.

After founding its crypto arm in 2021, Jump emerged as a major market maker and investor in crypto assets.

The lawsuit

Many of the allegations in Snyder’s lawsuit have already been made public through court documents in Kwon’s criminal case.

Jump was a market maker for Terra’s primary cryptocurrencies: UST, a stablecoin designed to hold a value of exactly $1 through a complicated arbitrage mechanism, and LUNA, a complementary token investors needed to execute the price-stabilizing arbitrage.

In exchange, Jump had the option of purchasing LUNA from Terraform at prices well below its market value.

But there was a separate “gentleman’s agreement” between Kwon and Kanav Kariya, the head of Jump Trading’s crypto unit: Jump would help Terraform protect UST’s peg to the US dollar.

“This agreement did not prescribe how Jump would maintain the peg, only that it would do so — an agreement that took Jump’s relationship far beyond typical market making activity," the lawsuit reads.

When UST fell to $0.90 in May 2021, Kwon and Kariya stuck a deal, according to the lawsuit and court documents in Kwon’s criminal case. Jump would purchase UST until it returned to peg. In exchange, Terraform would waive vesting requirements on the LUNA that Jump was entitled to purchase.

The plan worked. Rather than alert investors UST’s arbitrage-based stability mechanism had failed, however, Kwon and Kariya gave interview after interview in which they said it had been a resounding success.

That’s because Jump couldn’t immediately profit off its deal, according to the lawsuit.

Jump had the right to purchase up to 65 million LUNA tokens for $0.40 cents per token. But it could only purchase about 1.2 million per month through September 2025. That gave Jump an incentive to keep its defence of the peg a secret, according to the lawsuit.

“Jump merely wanted to keep the platform afloat long enough to receive all of its Luna — and the outsized, ill-gotten profits from its ludicrously low strike price," the lawsuit reads.

“Jump’s actions to restore the peg were so secretive that most Terraform employees did not know about them at the time.”

Snyder has also accused Jump of lying about the Luna Foundation Guard, an ostensibly independent body that was funded by Terra and charged with using its vast stores of crypto to defend UST’s peg.

In reality, Kwon and Kariya dominated the organisation, according to the lawsuit.

Terraform gifted Luna Foundation Guard LUNA tokens worth more than $5 billion. The foundation then sold that LUNA for other cryptocurrencies, including Bitcoin.

But it didn’t sell to just any buyer, according to the lawsuit. It sold to Jump, which purchased the tokens at a 40% discount to their market value.

In May 2022, when UST fell below $1 a second time, the foundation transferred its Bitcoin to Jump to use on its behalf, according to the lawsuit. But there was no formal agreement in place.

“It is not clear how Jump used that Bitcoin, and whether it did so in ways that further lined its own pockets,” the lawsuit reads.

At the same time, Jump’s William DiSomma — the other executive named in the lawsuit — tried to marshal other trading firms to help in defending the peg. Instead, those firms saw an opportunity and began trading against UST and LUNA, hastening Terra’s downfall.

In a statement to the Wall Street Journal, which broke the news of the lawsuit, a Jump spokeswoman called the allegations “baseless.”

“This is a desperate attempt by Terraform Labs to shift blame and financial responsibility away from the crimes that Do Kwon committed,” she said.

Kariya first joined Jump as an intern, and was only 25 when he was named the president of its crypto arm in 2021. He announced his departure from the firm last year.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at [email protected].