Jump Trading sued for $4B over alleged role in Terra collapse

The administrator overseeing the wind-down of Terraform Labs has filed a lawsuit against high-frequency trading firm Jump Trading, alleging that the company unlawfully profited from and helped contribute to the collapse of the crypto ecosystem founded by Do Kwon. 

The complaint seeks $4 billion in damages from Jump Trading, its co-founder William DiSomma, and former head of its crypto division Kanav Kariya.

The lawsuit was brought by Todd Snyder, the plan administrator appointed by a bankruptcy court to manage the liquidation of Terraform Labs following its failure.

According to the filing, Jump Trading played a significant role in supporting Terraform’s algorithmic stablecoin system while allegedly engaging in trading practices that generated substantial profits at the expense of the broader market.

Terraform Labs collapsed in 2022 after its algorithmic stablecoin TerraUSD lost its dollar peg, triggering a massive market selloff that erased tens of billions of dollars in value. The failure sent shockwaves through the crypto industry and ultimately led to bankruptcy proceedings for Terraform and legal action against its founder.

In the complaint, Snyder alleges that Jump Trading used its market-making capabilities and high-speed trading strategies to benefit from the volatility surrounding Terraform’s tokens, while simultaneously contributing to the system’s instability. The filing claims that Jump’s actions distorted market signals and deepened the losses suffered by retail and institutional investors.

The lawsuit also highlights Kanav Kariya’s role within Jump’s crypto operations, noting his rise from intern to president of the firm’s crypto trading business. 

Prosecutors argue that senior leadership at Jump was aware of the risks tied to Terraform’s structure but continued to engage with the ecosystem for financial gain.

Jump Trading has not yet publicly responded to the allegations. If successful, the lawsuit could become one of the largest recovery efforts tied to the Terraform collapse and may further intensify scrutiny on the role of major trading firms in past crypto market failures.