A new lawsuit has reopened the investigation into the collapse of one of cryptocurrency’s most damaging failures.
Summary
- Terraform Labs’ bankruptcy estate is seeking $4 billion in damages from Jump Trading.
- The lawsuit alleges that secret deals were made related to the stability of TerraUSD and LUNA.
- The case could reveal new details about Terra’s collapse through discovery.
The legal ramifications of the Terra collapse have intensified again this week.
The Wall Street Journal reported on December 18, the court-appointed administrator overseeing Terraform Labs’ bankruptcy filed a $4 billion lawsuit against Jump Trading and two of its senior figures in U.S. federal court.
Claims related to the rise and fall of Terra
The lawsuit was filed in the U.S. District Court for the Northern District of Illinois by Todd Snyder, the plan administrator charged with liquidating Terraform Labs. It names Jump Trading LLC, co-founder William DiSomma and former Jump Crypto president Kanav Kariya as defendants.
The complaint alleges that before the collapse of the Terra ecosystem in May 2022, Jump was critical to sustaining and profiting from it. According to the filing, Jump allegedly entered into undisclosed agreements with Terraform founder Do Kwon as early as 2019, allowing the company to purchase significant quantities of LUNA at deep discounts while publicly portraying itself as a neutral market player.
Jump discreetly intervened to restore the stablecoin’s dollar peg during a TerraUSD depeg in May 2021 by purchasing significant amounts of tokens. But publicly, the recovery was attributed to Terra’s algorithmic design. This deception strengthened trust in the system while helping Terraform evade regulatory scrutiny.
The lawsuit further alleges that Jump later caused vesting restrictions to be lifted on its LUNA holdings, allowing for quick sales at significantly higher prices. These trades are described as generating profits approaching $1 billion.
During Terra’s final collapse in May 2022, nearly 50,000 bitcoin is transferred from the Luna Foundation Guard to Jump without a formal agreement, according to the complaint, adding to the claims of self-dealing.
Legal interests and broader context
Snyder’s filing characterizes Jump’s conduct as manipulation and concealment that enriched the company while accelerating losses to investors. The collapse of the Terra ecosystem wiped out an estimated $40 billion in market value and caused a broader chain reaction in the crypto market.
Jump Trading has not publicly responded to the lawsuit. DiSomma and Kariya have previously invoked their Fifth Amendment rights in related investigations, and Kariya left Jump last year.
The case adds to a growing list of legal actions related to Terra. In December 2024, a Jump subsidiary agreed to pay $123 million to settle SEC charges related to misleading statements about TerraUSD’s stability.
Terraform Labs itself reached a roughly $4.5 billion settlement with U.S. regulators, largely handled through bankruptcy proceedings, while Do Kwon was recently sentenced to 15 years for fraud.
If the case develops further, the discovery could reveal internal communications and trading data that could reshape how Terra’s collapse and the role of major trading firms are understood.
#estate #Terraform #Labs #files #billion #lawsuit #Jump #Trading