Terraform Liquidators Accuse Jump Trading of Contributing to Crypto's Largest Collapse: Report

Summary:
The administrators winding down Terraform Labs are taking legal action against Jump Trading, alleging that the company profited from the rise and fall of the Terra cryptocurrency, resulting in extensive losses for investors. This lawsuit seeks $4 billion in damages.

Key Takeaways

Terraform Labs’ administrators have filed a lawsuit against Jump Trading and its key members, seeking $4 billion in damages.
Jump Trading is accused of manipulating the Terraform ecosystem, leading to significant losses for investors.
The downfall of Terra involved the collapse of its stablecoin, TerraUSD (UST), and its sister token, Luna (LUNA), resulting in a loss of around $40 billion in value.
Jump Trading reportedly made substantial profits from trading Luna, even as the market crashed.
The legal actions follow a tumultuous period for Terraform's leadership, including a settlement with the SEC and a prison sentence for Do Kwon.

Terraform

Allegations Against Jump Trading

The administrators overseeing the bankruptcy of Do Kwon’s Terraform Labs have turned their attention to one of the biggest trading firms in the crypto world, Jump Trading. They allege that Jump Trading profited from the surge of Terra’s value and contributed to its eventual downfall.

Todd Snyder, the plan administrator appointed by the court, has filed a lawsuit in federal court in Illinois. The lawsuit seeks $4 billion in damages against Jump Trading, its co-founder William DiSomma, and former Jump Crypto president Kanav Kariya. Snyder's statement indicated that Jump Trading allegedly manipulated the Terraform Labs ecosystem for its benefit, causing financial devastation for numerous unsuspecting investors. He claimed, “This action is a necessary step to hold Jump Trading accountable for illegal conduct that directly caused the largest crypto collapse in history.”

The Collapse of Terra and Its Ripple Effects

The collapse of Terraform still resonates throughout the cryptocurrency market. TerraUSD, commonly known as UST, was designed as a stablecoin that was supposed to maintain a value of $1 through an algorithm linked to its counterpart, Luna (LUNA). However, when UST lost its peg in May 2022, both tokens quickly plummeted in value, nearly reaching zero within days.

The resulting wipeout erased approximately $40 billion and impacted various sectors within the crypto industry. Numerous lenders, funds, and exchanges that previously relied on UST yields and Luna liquidity faced significant challenges.

Three Arrows Capital was one of the first notable casualties, and additional failures followed as market confidence and collateral began to evaporate. In January 2024, Terraform filed for bankruptcy, and public records indicate that around $300 million has been recovered for creditors as the estate unwinds its remaining assets.

Claims About Peg Support and Profits During Terra's Downfall

Snyder’s complaint alleges that Jump Trading was involved in a covert arrangement to maintain TerraUSD's peg before its collapse and subsequently profited significantly while leaving the wreckage behind. The SEC has previously indicated that Jump's trading activities in Luna resulted in approximately $1 billion in profits derived from selling the token.

This lawsuit comes after a challenging year for the previous leadership at Terraform. The company and Do Kwon reached a settlement of approximately $4.5 billion with the SEC in 2024, following a jury's verdict on securities fraud. Kwon, who was once a celebrated figure in the crypto community, pleaded guilty to charges in August 2025, and a federal judge in New York sentenced him to 15 years in prison just last week.