CryptoCurrency
Terraform Labs estate files $4B lawsuit against Jump Trading
A new lawsuit has reopened scrutiny around the collapse of one of crypto’s most damaging failures.
Summary
- Terraform Labs’ bankruptcy estate is seeking $4B in damages from Jump Trading.
- The lawsuit alleges undisclosed deals tied to TerraUSD and LUNA’s stability.
- The case could expose new details about Terra’s collapse through discovery.
The legal fallout from the Terra collapse widened again this week.
The Wall Street Journal reported on Dec. 18 that the court-appointed administrator overseeing Terraform Labs’ bankruptcy has filed a $4 billion lawsuit against Jump Trading and two of its senior figures in U.S. federal court.
Claims tied to Terra’s rise and collapse
The lawsuit was filed in the U.S. District Court for the Northern District of Illinois by Todd Snyder, the plan administrator tasked with winding down Terraform Labs. It names Jump Trading LLC, co-founder William DiSomma, and former Jump Crypto president Kanav Kariya as defendants.
The complaint claims that before the Terra ecosystem’s collapse in May 2022, Jump was crucial in both sustaining and benefiting from it. According to the filing, Jump allegedly entered into secret agreements with Do Kwon, the founder of Terraform, as early as 2019, enabling the company to purchase significant quantities of LUNA at steep discounts while publicly portraying itself as a neutral market player.
Jump discreetly intervened to reinstate the stablecoin’s dollar peg during a TerraUSD depeg in May 2021 by buying significant amounts of tokens. But in public, Terra’s algorithmic design was credited with the recovery. This deception strengthened trust in the system while assisting Terraform in avoiding regulatory scrutiny.
The lawsuit further alleges that Jump later secured the removal of vesting restrictions on its LUNA holdings, enabling rapid sales at significantly higher prices. Those transactions are described as generating profits approaching $1 billion.
During Terra’s final collapse in May 2022, the complaint says nearly 50,000 bitcoin were transferred from the Luna Foundation Guard to Jump without a formal agreement, adding to claims of self-dealing.
Legal stakes and broader context
Snyder’s filing characterizes Jump’s conduct as manipulation and concealment that enriched the firm while accelerating losses for investors. The Terra ecosystem’s collapse erased an estimated $40 billion in market value and triggered a broader chain reaction across the crypto market.
Jump Trading has not publicly responded to the lawsuit. DiSomma and Kariya have previously invoked their Fifth Amendment rights in related investigations, and Kariya left Jump last year.
The case adds to a growing list of legal actions tied to Terra. In December 2024, a Jump subsidiary agreed to pay $123 million to settle SEC charges related to misleading statements about TerraUSD’s stability.
Terraform Labs itself reached a roughly $4.5 billion settlement with U.S. regulators, largely addressed through bankruptcy proceedings, while Do Kwon was recently sentenced to 15 years on fraud charges.
If the case moves forward, discovery could surface internal communications and trading records that reshape how Terra’s collapse, and the role of major trading firms, is understood.
