Lawsuit for 4 billion USD! Terra liquidators accuse Jump Trading of 'behind-the-scenes trading' triggering the collapse.

The Terra (LUNA) crash in 2022, which shocked the world and led to the evaporation of $40 billion overnight, has once again sparked a legal storm. The bankruptcy liquidator of Terraform Labs has recently filed a lawsuit against top quantitative trading giant Jump Trading and its executives, attempting to hold the company accountable for the collapse of Terra and seeking civil damages amounting to as much as $4 billion.

According to a report by The Wall Street Journal, Todd Snyder, the bankruptcy liquidator for Terraform Labs, has filed a lawsuit in court. The list of defendants includes not only Jump Trading but also the company's co-founder William DiSomma and former president Kanav Kariya, who left the position in 2024.

Terraform Labs was founded by Do Kwon, and its core products are the algorithmic stablecoin TerraUSD (UST) and its sister coin Terra (LUNA). However, in May 2022, UST experienced a severe de-pegging and failed to maintain its 1:1 peg with the US dollar, quickly falling into a “death spiral” — UST plummeted, LUNA was infinitely minted, and prices collapsed, resulting in a loss of $40 billion in market value, triggering the bankruptcy of several cryptocurrency lending platforms.

Terraform ultimately filed for bankruptcy in 2024, and Do Kwon himself pleaded guilty this August, receiving a new sentence of 15 years in prison from a U.S. court last week.

Todd Snyder, the bankruptcy liquidator of Terraform Labs, claims that Jump Trading abused the Terraform Labs ecosystem through behind-the-scenes trading to artificially inflate the value of the algorithmic stablecoin TerraUSD (UST), creating a false illusion of a stable mechanism, and profited billions of dollars from it, ultimately leading to the collapse of the ecosystem.

According to The Wall Street Journal, Todd Snyder stated: “Taking this action is a necessary step to hold Jump Trading accountable for illegal activities that directly led to the largest crash event in cryptocurrency history.”

In fact, the relationship between Jump Trading and Terraform Labs has long been revealed in the investigation documents of the U.S. Securities and Exchange Commission (SEC).

The US SEC accused that after UST briefly lost its peg to the US dollar in May 2021, Jump's cryptocurrency division “Tai Mo Shan Limited” splurged $20 million to support the market; in return, the company received a large amount of early unlocked LUNA tokens and was able to sell them off in the market for cash.

According to the SEC's lawsuit, Jump Trading and Terraform Labs misled investors through this transaction, causing them to misunderstand the effectiveness of the stablecoin mechanism; while Tai Mo Shan profited $1.28 billion from this transaction. Ultimately, Tai Mo Shan paid approximately $123 million in fines to settle the lawsuit.

In response to the overwhelming accusations, a spokesperson for Jump Trading strongly rebuffed, stating that this lawsuit is a “desperate attempt to shift the blame of Terraform Labs and Do Kwon onto others,” and emphasized that the company will do everything possible to defend its innocence and counter these allegations.

According to statistics from The Wall Street Journal, Terraform Labs has recovered approximately $300 million in assets to compensate creditors, but compared to the overall scale of losses, it is still just a drop in the bucket.

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Tags: Do Kwon Jump Trading LUNA Tai Mo Shan Terra Terraform Labs TerraUSD UST collapse culprit crash death spiral compensation decoupling lawsuit