Terraform Labs Administrator Files $4B Lawsuit Against Jump Trading in Explosive Crypto Legal Battle

Terraform Labs' administrator just dropped a legal grenade—filing a staggering $4 billion lawsuit against trading giant Jump Trading.

The Allegations: Market Manipulation Masterclass

The complaint alleges Jump Trading exploited its position during Terra's infamous collapse, turning crisis into profit while retail investors watched their savings evaporate. Court documents claim sophisticated trading strategies extracted value precisely when the ecosystem needed stability most.

The Numbers Don't Lie

That $4 billion figure represents one of the largest crypto-related lawsuits ever filed—a number that would make even Wall Street's most aggressive litigators raise an eyebrow. The administrator argues this represents damages from alleged market activities that worsened Terra's death spiral.

Why This Matters Now

This isn't just about 2022's wreckage. The lawsuit lands as regulators globally tighten crypto oversight and institutional players face increasing scrutiny about their role in volatile markets. It raises uncomfortable questions about how sophisticated firms navigate—or potentially exploit—crypto's wild price swings.

The Ripple Effect

Legal experts predict this case could set precedents for how trading activities during market crises get judged. A win for Terraform's administrator might open floodgates for similar actions; a loss could embolden quantitative firms to push strategies further during future collapses.

The Bottom Line

While retail investors often get blamed for 'irrational exuberance,' this lawsuit suggests the real money moves happen in the shadows—where algorithms and privileged positions turn market chaos into generational wealth. Just another reminder that in crypto, the house usually wins—even when the house is on fire.

Jump trading conducted secret token deals, administrator says

According to the lawsuit, Jump and Terraform supposedly entered into several secret agreements starting in 2019, which gave the former platform preferential access to Luna tokens at deeply discounted prices. Those arrangements allegedly allowed the trading firm to amass profits when Luna’s market value surged to an all-time high in 2022.

Per one agreement cited in the complaint, Jump purchased millions of Luna tokens for 40 cents a pop. At its peak, Luna traded above $110 per token, and according to court filings from the Securities and Exchange Commission (SEC), Jump made about $1 billion by selling the token at its highs.

The lawsuit also reiterated these deals were not disclosed to the public market, so Jump had an unfair advantage over retail investors who bought tokens without knowing the true structure of the ecosystem. The arrangements, according to the administrator, distorted market pricing and hid several fundamental weaknesses in the Luna token and Terraform’s business.

Speaking to the Wall Street Journal, a Jump spokeswoman rejected the claims and called the lawsuit an attempt by Do Kwon’s camp to deflect their responsibility in the fall of the digital token issuer. 

“This is a desperate attempt by Terraform Labs to shift blame and financial responsibility away from the crimes that Do Kwon committed. We will defend ourselves vigorously against these baseless claims,” she said.

Jump Trading propped up TerraUSD behind the scenes

Terraform Labs piled on their legal charges against Jump Trading saying it secretly intervened to support TerraUSD, Terraform’s algorithmic stablecoin, and helped trick the public to believe the system was functioning as it was meant to do.

Terraform collapsed in 2022 after TerraUSD lost its one-to-one peg with the US dollar, and Luna, the “system stabilizer,” plunged to NEAR zero merely three days after the depeg. The sudden crash erased roughly $40 billion in market value and left thousands of investors with empty coffers.

The administrator alleges that before the final collapse, Jump had entered into a “gentlemen’s agreement” with Terraform to help keep TerraUSD’s peg. That arrangement was allegedly kept hidden to avoid regulatory scrutiny.

The office insisted that in May 2021, when UST briefly slipped below $1 and recovered, it was from the causality of large-scale purchases by Jump. The Chicago-based algorithmic trading company supposedly “misled the public” by pushing Terraform to tell the public UST’s peg had been restored organically.

Luna Foundation Guard benefited Jump officials and Do Kwon

After the initial depegging took place in 2021, Terraform created the Luna Foundation Guard, a reserve to defend TerraUSD using Bitcoin and other crypto assets. The plan administrator added that the foundation was directed by Terraform founder Do Kwon and Jump’s Kariya.

When TerraUSD depegged again in May 2022 and entered a so-called death spiral, the administrator claims nearly 50,000 bitcoins were transferred from the foundation to Jump without any written agreement of how the assets WOULD be used.

Terraform filed for bankruptcy in January 2024 and agreed to pay about $4.5 billion to settle a civil securities fraud lawsuit brought by the SEC. About $300 million in assets have been recovered so far to compensate creditors, per public filings shared by the fallen crypto company.

Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.