How Jump Trading Allegedly Propped Up TerraUSD

The administrator overseeing the wind-down of Terraform Labs has filed a $4 billion lawsuit against high-frequency trading firm Jump Trading. They accuse the market maker of secretly manipulating prices and contributing to the collapse of Do Kwon’s once-dominant crypto ecosystem.

It comes barely a week after the judge issued Do Kwon his sentence, a 15-year term in federal prison for orchestrating a $40 billion crypto fraud.

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Terraform Labs Estate Seeks $4 Billion From Jump Trading

The complaint names Jump Trading, co-founder William DiSomma, and former head of its crypto division, Kanav Kariya. It alleges unlawful profiteering tied to the failure of TerraUSD (UST).

Citing court filings, The Wall Street Journal reports that the Terraform Labs estate claims Jump conducted undisclosed, large-scale trading interventions to prop up UST during multiple de-pegging episodes in 2021 and 2022.

Rather than stabilizing the system, the administrator argues these actions created a false sense of market confidence. In turn, this masked structural weaknesses that ultimately made Terra’s collapse more severe.

At the center of the lawsuit is the claim that Jump aggressively purchased UST whenever the algorithmic stablecoin fell below its $1 peg. These purchases allegedly inflated demand artificially, misleading market participants into believing the peg mechanism was functioning as designed.

The estate argues that Jump was not acting as a neutral liquidity provider. Instead, it exploited its market position and inside knowledge to extract profits from the volatility it helped manage.

The filing alleges that Jump earned roughly $1 billion through these strategies, benefiting from preferential token arrangements and trading advantages. Meanwhile, retail investors remained unaware of the behind-the-scenes support.

When Terra ultimately unraveled in May 2022, triggering an estimated $40 billion wipeout across UST and LUNA, the lawsuit claims the earlier illusion of stability magnified the damage.

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It is worth mentioning that this is not the first time Jump Trading is linked to manipulation allegations. In October 2024, game developer FractureLabs filed a lawsuit against Jump Trading over crypto manipulation claims

Do Kwon’s Sentencing Puts Fresh Spotlight on Jump Trading’s Market Power

The legal action arrives amid renewed headlines of Terra’s collapse. It follows Do Kwon’s recent sentencing to 15 years in prison over fraud charges related to the project.

In the days following that ruling, some market observers publicly speculated that additional institutional players could face legal exposure, with Whale Calls citing Jump Trading.

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Beyond the immediate allegations, the case highlights Jump Trading’s formidable technological capabilities.

Jump Trading’s Technological Edge and Its Role in the Lawsuit

Jump is widely regarded as one of the most sophisticated high-frequency trading firms globally. Industry reporting has highlighted its willingness to spend vast sums to gain marginal speed advantages, including the acquisition of a microwave tower previously used by NATO to shave milliseconds off transatlantic trade transmission times.

In 2018, Jump also partnered with firms such as Citadel to build the “Go West” undersea fiber-optic cable, connecting Chicago and Tokyo and enabling faster access to global futures markets.

According to commentary from Colin Wu, Jump’s quote data processing capabilities are considered to be on a vastly different scale from those of many competitors. This reflects the asymmetric power that large trading firms can wield in both traditional and crypto markets.

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That technological edge now forms part of the broader context of the lawsuit. While the complaint does not allege the use of illegal infrastructure, it argues that Jump’s scale and sophistication amplified the market impact of its UST trades. This raises questions about fairness, disclosure, and market integrity.

If successful, the case could have far-reaching implications. A ruling in favor of the Terraform Labs estate may establish a clearer legal boundary between legitimate market making and manipulation in crypto markets, potentially reshaping how large trading firms operate.

It could also lead to substantial financial penalties, with any recovered funds likely directed toward compensating creditors and victims of the Terra collapse.

Jump Trading has not publicly commented on the lawsuit as of the time of publication, but is expected to mount a vigorous defense.

As discovery continues, the case may offer rare insight into the opaque mechanics of crypto market making. Beyond that, it could mark a watershed moment in the industry’s ongoing reckoning with accountability.