In a significant legal move, Terraform Labs has launched a $4 billion lawsuit against Jump Trading, accusing the firm of manipulating the market surrounding the algorithmic stablecoin, UST. This lawsuit, filed on December 18, 2025, by the bankruptcy trustee of Terraform Labs, Todd Snyder, centers on allegations that Jump Trading played a pivotal role in the demise of a crypto ecosystem valued at approximately $40 billion.
The lawsuit claims that Jump Trading engaged in deceptive practices to artificially stabilize the UST exchange rate during critical moments in May 2021, shortly after the stablecoin lost its peg to the US dollar. This alleged manipulation created a façade of stability, enticing further investments just before the catastrophic collapse of the Terra project in 2022.
Central to the accusations is an undisclosed agreement between Do Kwon, the founder of Terraform Labs, and Kanav Kariya, the CEO of Jump Crypto. Documents revealed during the lawsuit suggest that following interventions to restore UST”s peg, Jump Trading acquired over 61 million LUNA tokens at a steep discount, approaching 100%. These tokens were later sold, supposedly yielding profits estimated at around $1.28 billion for the trading firm.
The liquidator asserts that this was not merely an act of market support but a calculated concealment of the underlying issues plaguing the project. The lawsuit raises further concerns regarding Kariya”s conduct, as he previously invoked the Fifth Amendment during an SEC investigation, refusing to answer pertinent questions.
This legal battle comes on the heels of a prior settlement between a subsidiary of Jump Trading and the US Securities and Exchange Commission (SEC), wherein the company agreed to pay $123 million without admitting wrongdoing. The ramifications of Terraform Labs” claims could set a transformative precedent for the cryptocurrency industry, potentially tightening the regulations governing transparency in the operations of market makers and their private arrangements affecting the stability of digital assets.
The fallout from the Terra ecosystem”s collapse has been severe, with Do Kwon facing a 15-year prison sentence due to his involvement in the events leading to the failure of the TerraUSD ecosystem. As this lawsuit unfolds, the implications for both companies and the broader crypto landscape will be closely monitored by investors and regulators alike.
