The administrators overseeing the dissolution of Terraform Labs have initiated a significant legal action against Jump Trading, claiming the trading firm played a pivotal role in the catastrophic collapse of the Terra ecosystem. The lawsuit, filed by Todd Snyder, the court-appointed plan administrator, in a federal court in Illinois, seeks to recover $4 billion in damages from Jump Trading, its co-founder William DiSomma, and former president of Jump Crypto, Kanav Kariya.
Snyder stated, “Jump Trading actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing that enriched Jump while financially devastating thousands of unsuspecting investors.” This legal action is viewed as a crucial measure to hold Jump Trading accountable for actions that allegedly led to the largest collapse in cryptocurrency history.
The fallout from the collapse of Terra still looms large over the cryptocurrency market. TerraUSD, or UST, was marketed as a stablecoin designed to maintain a $1 peg through a complex algorithm linked to its counterpart, LUNA. However, when UST lost its peg in May 2022, it triggered a rapid decline, sending both tokens spiraling towards zero and resulting in the loss of approximately $40 billion in market value. This event created a domino effect, adversely affecting numerous lenders, funds, and exchanges that had relied on UST”s yields and LUNA”s liquidity.
Three Arrows Capital was among the first significant casualties of this crisis, with subsequent failures occurring as market confidence dwindled and collateral assets evaporated. Terraform Labs filed for bankruptcy in January 2024, with reports indicating that the estate has thus far managed to recover around $300 million for its creditors in the unwinding process.
The lawsuit alleges that prior to UST”s final collapse, Jump Trading entered into a clandestine arrangement to support the stablecoin”s peg. After reaping substantial profits during the downturn, the firm is accused of abandoning the wreckage it helped create. Regulatory bodies have previously scrutinized Jump”s trading activities related to LUNA, with the SEC claiming in court filings that the firm profited by approximately $1 billion through its trading strategies.
This lawsuit comes on the heels of a turbulent period for Terraform”s leadership. In 2024, the company and Do Kwon reached a settlement with the SEC amounting to roughly $4.5 billion following a jury”s verdict on securities fraud allegations. Kwon, once celebrated as a visionary founder, pleaded guilty to charges in August 2025 and was subsequently sentenced to 15 years in prison by a federal judge in New York.
