Terraform Labs Seeks $4B in Damages From Jump Trading and Executives

The court-appointed administrator overseeing Terraform Labs’ liquidation has filed a sweeping lawsuit against Jump Trading.

It accuses the firm and senior executives of playing a key role in the 2022 collapse of the Terra ecosystem. According to The Wall Street Journal, the complaint targets Jump Trading, its co-founder William DiSomma, and its former president, Kanav Kariya, who departed the firm in 2024.

Todd Snyder, appointed to manage Terraform’s bankruptcy proceedings, is seeking $4 billion in damages. Terraform Labs later confirmed the lawsuit in a post on X.

Collapse of the Terra Ecosystem

The legal action centers on the sudden breakdown of Terraform Labs in 2022. Specifically, the company, founded by Do Kwon, was built around TerraUSD, an algorithmic stablecoin designed to maintain a one-dollar peg through market incentives rather than reserves.

However, that mechanism failed when TerraUSD lost its peg, triggering a cascading collapse in its companion token, Luna. Consequently, within days, more than $40 billion in market value was wiped out, sending shockwaves across the crypto industry and contributing to a series of lending platform failures.

Following several unsuccessful attempts to revive the ecosystem, Terraform Labs filed for bankruptcy in 2024. Regulatory consequences soon followed. The company later agreed to pay $4.47 billion to settle civil charges brought by the U.S. Securities and Exchange Commission (SEC).

At the same time, scrutiny intensified around Terraform’s founder. Do Kwon pleaded guilty to two criminal charges in August. Last week, a U.S. court sentenced him to 15 years in prison.

Administrator Alleges Market Manipulation by Jump

Against this backdrop, Snyder alleges that Jump Trading exploited vulnerabilities in Terraform’s system. Specifically, the lawsuit alleges that the firm entered into a concealed arrangement to provide artificial support for TerraUSD before its collapse.

According to the filing, Jump benefited substantially from the arrangement. Investors, however, were led to believe that the stablecoin was operating properly. Snyder said the lawsuit aims to hold Jump accountable for conduct he argues was directly tied to the collapse.

SEC Findings Add Context

These allegations echo earlier conclusions reached by the SEC. In 2024, the regulator said Jump’s crypto arm, Tai Mo Shan, intervened during a brief TerraUSD depegging event in May 2021 by purchasing $20 million worth of the stablecoin.

In return, Tai Mo Shan allegedly received early access to unlocked Luna tokens, which the SEC said were later sold into the market for a profit of $1.28 billion. Tai Mo Shan ultimately agreed to pay approximately $123 million to settle the SEC’s claims.

Jump Trading Rejects the Claims

Nevertheless, Jump Trading has pushed back strongly against the lawsuit. A company spokesperson described the case as an attempt to shift responsibility away from Terraform Labs and Do Kwon.

The firm stated it intends to defend itself vigorously, according to comments reported by the WSJ.

Meanwhile, recovery efforts continue under the liquidation process. Administrators have retrieved roughly $300 million in assets for creditor compensation. However, that amount remains small compared with the scale of losses caused by the collapse.