Jump Trading accused of manipulating UST value, acquiring LUNA at ultra-low prices, facing class-action lawsuit

According to Blockworks report, trading firm Jump Trading is facing a new class-action lawsuit alleging that the company engaged in large-scale purchases of algorithmic stablecoin UST, manipulating its value close to $1, thus misleading investors about the true price of UST and the associated risks with the token.

Market Maker Accused of Involvement in Terra Fraud Resulting in $4 Billion Loss for Investors

According to Blockworks, the Chicago trading giant is accused of aiding and abetting Terra in a fraudulent scheme that led to investors losing at least $4 billion in related cryptocurrencies.

New Jersey resident Taewoo Kim, on behalf of affected investors, filed a lawsuit on May 9, alleging that Jump Trading was an early partner and funder of Terraform Labs. Negotiations between former Terraform CEO Do Kwon and Jump reportedly began in November 2019 and culminated in a series of agreements.

Terra and Jump Had a Profit-Sharing Agreement, Intentionally Misleading the Market

As part of the agreement, Terraform Labs TFL lent Jump a total of 30 million LUNA tokens to provide liquidity services for LUNA and UST. Jump had the right to purchase LUNA tokens at a significant discount as a reward.

According to the lawsuit document, "Between May 23 and 27, 2021, Jump Trading purchased over 62 million UST tokens. To cover up Jump's manipulative behavior, these trades were executed on multiple cryptocurrency exchanges. To compensate Jump for secretly manipulating UST and aUST, TFL agreed to transfer 61.4 million LUNA tokens to Jump at a fixed price of $0.40 per token, effective for the next four years regardless of the actual market value of LUNA in the secondary market." It is alleged that Jump profited over $1.28 billion through this.

UST fell below $1 on May 19, 2021, resulting in a 10% drop. A year later, Terra suffered a catastrophic collapse, and the price of UST dropped to zero.

The lawsuit alleges that shortly after on May 23, 2021, Kwon and Jump manipulated the token prices on the Terra lending platform Anchor for UST and aUST. Jump allegedly used large purchases of UST to temporarily restore the illusion of UST being valued at $1.

The lawsuit also accuses TFL, Jump, and Jump Crypto CEO Kanav Kariya of falsely stating that UST's "re-pegging" was restored by algorithms from Terraform Labs, misleading the market's assessment of UST's value and risk perception.

In a criminal lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Do Kwon in February, it was mentioned that he sought the assistance of a U.S. trading firm in manipulating the market price of UST, with the lawsuit representatives believing that firm to be Jump Trading.

SEC submitted updated information on 5/15, revealing details of the collaboration between Terraform Labs and a specific trading firm:

Learn about the recent whereabouts of Do Kwon