File a claim for 4 billion USD! Terra liquidator accuses Jump Trading of "behind-the-scenes trading" triggering the crash

The Terra (LUNA) crash in 2022, which shocked the world and caused $40 billion to evaporate overnight, has now reignited a legal storm. The bankruptcy liquidation administrator of Terraform Labs has recently filed lawsuits against top quantitative trading giant Jump Trading and its executives, aiming to hold the company responsible for Terra’s collapse and to seek civil compensation amounting to $4 billion.

According to The Wall Street Journal, Todd Snyder, the bankruptcy liquidation administrator of Terraform Labs, has filed a lawsuit in court. The defendants include Jump Trading, co-founder William DiSomma, and former President Kanav Kariya, who stepped down in 2024.

Terraform Labs was founded by Do Kwon, with core products including the algorithmic stablecoin TerraUSD (UST) and its sister coin Terra (LUNA). However, in May 2022, UST experienced a severe depeg, failing to maintain its 1:1 peg with the US dollar, immediately falling into a “death spiral”—UST plummeted, LUNA was infinitely minted, and prices crashed, resulting in a $40 billion market cap evaporation and causing multiple crypto lending platforms to go bankrupt.

Terraform ultimately filed for bankruptcy in 2024. Do Kwon himself pleaded guilty this August and was sentenced last week to 15 years in prison by a U.S. court.

Todd Snyder, the bankruptcy administrator of Terraform Labs, claims that Jump Trading manipulated the Terraform Labs ecosystem through behind-the-scenes trading, artificially inflating the value of the algorithmic stablecoin TerraUSD (UST), creating a false impression of an effective stability mechanism, and profiting billions of dollars, ultimately leading to the ecosystem’s collapse.

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

In fact, the relationship between Jump Trading and Terraform Labs had already been exposed in investigation documents from the U.S. Securities and Exchange Commission (SEC).

Last year, the SEC accused that after UST first briefly lost its peg to the dollar in May 2021, Jump’s cryptocurrency division “Tai Mo Shan Limited” invested $20 million to defend the peg; in return, the company received a large amount of unlocked LUNA tokens and was able to sell them on the market for cash.

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

Facing mounting accusations, a spokesperson for Jump Trading responded strongly, calling the lawsuit “a desperate attempt to shift the blame for Terraform Labs and Do Kwon onto others,” and emphasized that the company will vigorously defend its innocence and refute these allegations.

According to 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 remains a drop in the bucket.

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