The administrator overseeing Terraform Labs’ liquidation has filed a lawsuit against Jump Trading and two of its senior executives, seeking to hold them financially responsible for the company’s multibillion-dollar collapse in 2022.
According to a report by The Wall Street Journal, Terraform Labs’ court-appointed plan administrator, Todd Snyder, is pursuing $4 billion in damages from Jump Trading, its co-founder William DiSomma, and former president Kanav Kariya, who departed the firm in 2024. Terraform later confirmed the lawsuit in a post on social media.
Key takeaways:
Terraform Labs’ liquidation administrator is seeking $4 billion from Jump Trading and two executives.
The lawsuit alleges Jump exploited the Terra ecosystem before its collapse.
Terraform’s failure in 2022 erased more than $40 billion from the crypto market.
Prior SEC findings had already highlighted undisclosed dealings between Jump and Terraform.
Terraform Labs, founded by Do Kwon, collapsed in 2022 after its algorithmic stablecoin TerraUSD lost its dollar peg, triggering a so-called death spiral alongside its sister token Luna. The implosion wiped out more than $40 billion in market value and sparked widespread contagion that led to multiple bankruptcies across the crypto lending sector.
After failed efforts to revive the ecosystem, Terraform filed for bankruptcy in 2024. As part of the process, the company agreed to pay $4.47 billion in penalties to the Securities and Exchange Commission. Kwon later pleaded guilty to two criminal charges and was sentenced last week to 15 years in a US prison.
Allegations against Jump Trading
Snyder alleges that Jump “actively exploited” the Terraform ecosystem by entering into a concealed arrangement designed to artificially support the value of TerraUSD before its eventual collapse. According to the lawsuit, Jump generated billions of dollars in profit from this agreement, while investors were misled about the stability of the project.
“This action is a necessary step to hold Jump Trading accountable for illegal conduct that directly caused the largest crypto collapse in history,” Snyder said, according to the Wall Street Journal.
SEC findings and prior settlements
Details of the alleged arrangement were previously outlined in SEC filings. The regulator said that Jump’s crypto arm, Tai Mo Shan, purchased $20 million worth of TerraUSD in May 2021 after the stablecoin briefly lost its peg. In exchange, Tai Mo Shan received early access to unlocked Luna tokens, which it later sold on the open market.
The SEC alleged that these actions gave investors a false impression of the stability and effectiveness of TerraUSD’s algorithmic mechanism. According to the regulator, Tai Mo Shan earned approximately $1.28 billion from the deal. The SEC later reached a settlement with Tai Mo Shan, which agreed to pay around $123 million in penalties.
Jump Trading has pushed back strongly against the new lawsuit. A company spokesperson reportedly described the legal action as a “desperate attempt” to deflect blame away from Terraform and Kwon, adding that Jump intends to vigorously defend itself.
So far, roughly $300 million in assets have been recovered for creditor compensation as part of Terraform’s liquidation process, according to the report. Representatives for Terraform Labs, Jump Trading and Kanav Kariya have been contacted for further comment.
