The administrator overseeing the wind-down of Terraform Labs has filed a $4 billion lawsuit accusing high-frequency trading firm Jump Trading of secretly manipulating markets and contributing to the collapse of the Terra ecosystem.
The legal action comes just days after Terraform founder Do Kwon was sentenced to 15 years in federal prison for orchestrating a crypto fraud that wiped out an estimated $40 billion in market value.
The complaint names Jump Trading, co-founder William DiSomma, and former head of its crypto division Kanav Kariya as defendants in the case.
According to the filing, the Terraform Labs estate alleges that Jump unlawfully profited from its involvement with the failed algorithmic stablecoin TerraUSD (UST).
Court documents cited by The Wall Street Journal claim Jump carried out undisclosed, large-scale trading interventions during multiple UST de-pegging events in 2021 and 2022.
The administrator argues that these interventions artificially propped up UST’s $1 peg rather than restoring genuine market stability.
By aggressively purchasing UST whenever it fell below $1, Jump is accused of creating a false impression that the peg mechanism was functioning properly.
The lawsuit claims this artificial demand misled traders and investors into believing the Terra system was structurally sound.
Rather than acting as a neutral liquidity provider, the estate alleges Jump exploited its market position and access to information for its own benefit.
The filing states that Jump earned approximately $1 billion through preferential token arrangements and trading advantages linked to UST volatility.
Retail investors, the lawsuit claims, were unaware of the behind-the-scenes support that masked Terra’s weaknesses.
When the ecosystem collapsed in May 2022, the administrator argues that the earlier illusion of stability significantly amplified investor losses.
The case also references earlier allegations against Jump, including a 2024 lawsuit filed by game developer FractureLabs over alleged crypto market manipulation.
Jump then systematically liquidated its DIO holdings, generating millions of dollars in revenue for itself, Bloomberg reported, citing an excerpt from that earlier lawsuit.
Do Kwon’s sentencing has renewed scrutiny of institutional players involved in Terra, with some market commentators publicly questioning Jump’s role.
The lawsuit highlights Jump Trading’s extensive technological capabilities, which are described as among the most advanced in global high-frequency trading.
Industry reports note that Jump has invested heavily in ultra-low latency infrastructure, including specialised microwave transmission networks.
In 2018, Jump partnered with major firms to develop the Go West undersea fibre-optic cable linking Chicago and Tokyo for faster global trading access.
Analyst Colin Wu has previously said Jump’s quote-processing capabilities operate on a scale far beyond many competitors.
The administrator argues that this technological edge magnified the market impact of Jump’s UST trades and raises concerns around fairness and disclosure.
If successful, the lawsuit could establish clearer legal boundaries between legitimate market making and manipulation in crypto markets.
Any recovered funds would likely be directed towards compensating creditors and victims of the Terra collapse.
Jump Trading has not publicly commented on the lawsuit at the time of publication but is expected to contest the claims vigorously.