Terraform Labs Files $4 Billion Claim Against Jump Trading Over Terra Collapse

TLDR

• Jump Trading faces a $4 billion lawsuit from Terraform Labs’ bankruptcy administrator over the 2022 Terra ecosystem collapse
• The suit alleges Jump made secret deals starting in 2019 to buy Luna tokens at heavily discounted prices
• Jump Trading allegedly propped up TerraUSD in May 2021 but publicly claimed the algorithmic system worked on its own
• The Securities and Exchange Commission previously stated Jump profited about $1 billion from selling Luna tokens
• Terraform founder Do Kwon received a 15-year prison sentence last week after his guilty plea

The administrator overseeing Terraform Labs’ bankruptcy proceedings has filed a $4 billion lawsuit against Jump Trading. Todd Snyder, appointed by the bankruptcy court, is targeting the trading firm and two of its executives.

The defendants include Jump Trading co-founder William DiSomma and Kanav Kariya, who previously served as president of the firm’s crypto trading division. Kariya departed the company in 2024.

Terraform Labs collapsed in 2022 when TerraUSD, an algorithmic stablecoin, lost its dollar peg. The sister token Luna also crashed to near zero within days. The combined collapse erased $40 billion in market value and affected hundreds of thousands of investors globally.

Early Deals Under Scrutiny

The lawsuit filed in U.S. District Court for the Northern District of Illinois alleges Jump Trading and Terraform Labs made private agreements beginning in 2019. These contracts gave Jump options to buy millions of Luna tokens at prices well below market rates.

Court documents describe one deal where Jump could purchase Luna tokens for 40 cents when the market price climbed above $110. These arrangements allegedly generated billions in profits for the trading firm.

The suit claims Jump also made an informal agreement to support TerraUSD’s dollar peg. Jump reportedly wanted to keep this arrangement private to avoid attention from regulators.

When TerraUSD dropped below $1 in May 2021, Jump allegedly intervened by buying the stablecoin to restore its peg. The lawsuit states Jump then told the public that TerraUSD’s algorithm successfully maintained the peg, concealing the firm’s role in the recovery.

Modified Contracts and Bitcoin Transfers

Following the May 2021 incident, Jump renegotiated its contracts with Terraform Labs. The revised terms removed vesting requirements, allowing Jump to receive and sell Luna tokens monthly without standard lockup restrictions.

The first depeg prompted the creation of Luna Foundation Guard. This entity maintained reserves of bitcoin and other cryptocurrencies to defend TerraUSD against future price drops.

During the May 2022 collapse, the foundation moved nearly 50,000 bitcoin to Jump Trading. According to the lawsuit, this transfer occurred without documented terms for how the bitcoin would be deployed.

The suit further alleges that DiSomma reached out to executives at other crypto trading firms seeking bailout money for Terra. Some firms reportedly used this intelligence to take positions against TerraUSD and Luna, accelerating the ecosystem’s failure.

Previous SEC filings indicate Jump earned roughly $1 billion from Luna sales. Current recovery efforts have collected approximately $300 million in assets for creditors.

Tai Mo Shan, a Jump Trading subsidiary, settled an SEC investigation for $123 million in December 2024. The probe examined the unit’s interactions with Kwon and Terraform in May 2021. Both Kariya and DiSomma invoked Fifth Amendment protections hundreds of times during SEC questioning, per the lawsuit.

Kwon pleaded guilty to two criminal counts in August and received a 15-year prison sentence last week.

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