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The liquidation administrator for Terraform Labs filed a massive $4 billion lawsuit against Jump Trading on Thursday, accusing the high-frequency giant of engineering a “secret bailout” that rigged the market and artificially extended the life of the doomed TerraUSD (UST) stablecoin.
Key Points
- Terraform Labs filed a $4 billion lawsuit against Jump Trading Thursday, alleging the firm engineered a "secret bailout" of the UST stablecoin in 2021.
- The complaint claims Jump secured a $1.28 billion windfall by obtaining deeply discounted Luna tokens in exchange for artificially propping up the peg.
- Plan administrator Todd Snyder argues this manipulation created a "mirage" of stability that delayed the collapse and trapped investors in a $40 billion loss.
Todd Snyder, the court-appointed plan administrator, filed the complaint in U.S. federal court, marking the most aggressive attempt yet to claw back funds for creditors of the 2022 collapse. The suit names Jump Trading, its co-founder William DiSomma, and former Jump Crypto president Kanav Kariya as defendants.
The filing alleges that Jump did not merely act as a market maker but actively conspired to manipulate the ecosystem. Snyder claims the firm entered into undisclosed agreements to prop up UST during its initial wobble in May 2021, creating a “mirage” of stability that lured investors into a $40 billion trap.
The $1.3 Billion “Sweetheart” Deal
At the center of the lawsuit is the “Tai Mo Shan” trading unit, Jump’s crypto subsidiary. The complaint, building on facts previously unearthed by the U.S. Securities and Exchange Commission (SEC), alleges that when UST lost its $1.00 peg in May 2021, Jump stepped in to buy massive quantities of the token.
In exchange for this “secret bailout,” Terraform Labs allegedly modified its protocol to grant Jump access to Luna tokens at a steep discount, effectively handing them over for near zero cost.
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Court documents state that Jump subsequently sold these discounted tokens into the open market, generating approximately $1.28 billion in profit. The estate argues this arrangement allowed Jump to enrich itself while the ecosystem rotted from the inside, delaying the inevitable collapse by a year and deepening the losses for retail holders.
“The action aims to recover value for creditors and hold Jump responsible for exploiting the ecosystem, leaving unsuspecting investors to bear the losses,” Terra said.
“Desperate Attempt”
Jump Trading immediately rejected the claims Thursday. A spokesperson for the Chicago-based firm described the lawsuit as a “desperate attempt” to shift blame away from Terraform Labs and its convicted founder, Do Kwon.
“The estate is attempting to rewrite history,” the firm stated, adding that it intends to vigorously defend its trading practices.
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The Hunt for Recovery
For the thousands of creditors still waiting for compensation, the lawsuit represents a “Hail Mary” for recovery. Public filings indicate the Terraform estate has recovered approximately $300 million to date, a fraction of the lost billions.
If successful, a $4 billion judgment would likely be the primary source of restitution for victims. The litigation comes just days after the criminal chapter of the saga concluded: Terraform founder Do Kwon was sentenced to 15 years in federal prison last week after pleading guilty to fraud charges in August 2025.
With Kwon incarcerated and Terraform Labs settled with the SEC for $4.47 billion, the estate has turned its sights on the only remaining entity with deep pockets: Jump.
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YONA GUSHIKEN
Yona brings a decade of experience covering gaming, tech, and blockchain news. As one of the few women in crypto journalism, her mission is to demystify complex technical subjects for a wider audience. Her work blends professional insight with engaging narratives, aiming to educate and entertain.
