The bankruptcy court-appointed administrator for the collapse of Terraform Labs is suing Jump Trading, accusing the high-speed trading company of illegally profiting and causing losses from the $40 billion collapse, The Wall Street Journal reported.
Todd Snyder, tasked with cleaning up the remnants of the cryptocurrency empire, is seeking $4 billion in damages from the trading firm, its co-founders William DiSomma and Kanav Kareiya. Kanav Kareya started out as an intern and later became the platform’s president. Terra’s Post-Chapter 11X account confirmed the Wall Street Journal report in a post on X on Friday
“Jump Trading actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing to make Jump richer while causing financial harm to thousands of unsuspecting investors,” Snyder said. “This action is a necessary step in holding Jump Trading accountable for the illegal conduct that directly led to the largest cryptocurrency collapse in history.”
Terraform Labs collapsed in 2022 after its algorithmic stablecoin TerraUSD (UST) lost its peg to the U.S. dollar, triggering a dramatic market spiral. Within days, the price of its sister token Luna dropped to close to zero. The $40 billion implosion destroyed the savings of hundreds of thousands of investors around the world and triggered a domino effect of collapses across the cryptocurrency industry, which culminated with the collapse of Sam Bankman-Fried’s FTX exchange in November of that year.
The Singapore-based company filed for bankruptcy in January 2024 and months later agreed to pay about $4.5 billion to the U.S. Securities and Exchange Commission (SEC) to settle a civil securities fraud lawsuit. Terraform founder Do Kwon, who founded the company in 2018, pleaded guilty to two criminal charges in August and was sentenced to 15 years in prison last week.
The court-appointed receiver claims that Jump Trading entered into a secret agreement to prop up UST before it collapsed and ultimately emerged from Terraform’s failure with billions of dollars in proceeds, according to filings in Illinois District Court.
Jump made about $1 billion from the sale of Luna, according to previous SEC filings cited by the Wall Street Journal.