USDTerraform Labs Liquidator’s $4 Billion Lawsuit Against Jump Trading Reopens the TerraUSD Collapse
Hidden Peg Support, Shadow Trading, and the Long Legal Tail of a $50 Billion Crypto Failure
TL;DR
- Terraform Labs’ court-appointed administrator has filed a $4 billion lawsuit accusing Jump Trading of secretly propping up TerraUSD’s peg while profiting from deeply discounted LUNA tokens.
- The case alleges undisclosed market-making arrangements, opaque Bitcoin transfers, and conduct that may have misled investors about the stability of an algorithmic stablecoin.
- The lawsuit lands as regulators tighten stablecoin oversight and as markets increasingly scrutinize how crypto price, crypto price index movements, and coin market cap figures are influenced behind the scenes.
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Terraform Labs’ long-running collapse has entered a new and consequential chapter, with the company’s court-appointed plan administrator filing a sweeping $4 billion lawsuit against Jump Trading and two of its senior executives, alleging that the Chicago-based trading firm played a hidden but decisive role in propping up TerraUSD’s dollar peg before the ecosystem’s dramatic implosion in 2022. The lawsuit, disclosed in mid-December 2025 filings, is part of ongoing efforts to recover funds for creditors following one of crypto’s most destructive failures, a collapse that erased an estimated $40 billion to $50 billion in value across the TerraUSD (UST) and LUNA markets.
The complaint was filed by the Office of the Terraform Labs Plan Administrator, led by Todd Snyder, who was appointed after the company entered Chapter 11 bankruptcy in January 2024. According to the filing, Jump Trading, along with co-founder William DiSomma and former Jump Crypto president Kanav Kariya, allegedly engaged in undisclosed trading arrangements with Terraform Labs that artificially supported UST’s peg to the U.S. dollar. Rather than allowing the algorithmic mechanism behind TerraUSD to function independently, the lawsuit claims that Jump used its capital and trading infrastructure to absorb selling pressure during early depegging events, creating the public impression that the system was stable and self-correcting.
Central to the allegations is the claim that Jump was compensated for this support through access to massive quantities of LUNA at prices far below market value. Court filings and related reporting describe arrangements allowing Jump to purchase LUNA for roughly $0.40 per token while the asset was trading at prices exceeding $110 during peak periods. The plan administrator argues that Jump later sold significant portions of those holdings into the open market, generating substantial profits while retail investors continued to buy into an ecosystem they believed was functioning as designed. Those profits, according to the lawsuit, came at the direct expense of market participants who relied on public statements about TerraUSD’s stability and the integrity of its peg.
The complaint further alleges that critical aspects of this relationship were concealed from investors and regulators, including the extent of Jump’s role in maintaining the peg and the economic incentives embedded in its token purchase agreements. One particularly sensitive claim involves large transfers of Bitcoin from the Luna Foundation Guard, the entity established to defend UST during periods of stress. Reporting cited in the case indicates that approximately 50,000 BTC were transferred to Jump without clear, documented terms governing how those reserves could be deployed, raising questions about whether emergency backstops intended to protect the system were instead used in opaque trading strategies.
Beyond the mechanics of peg defense, the lawsuit accuses Jump of conduct that may have accelerated the Terra ecosystem’s collapse. The plan administrator claims that conflicts of interest emerged as Jump simultaneously supported UST in the market while seeking outside capital and potentially signaling vulnerabilities to other sophisticated trading firms. Those actions, the complaint argues, undermined confidence at a critical moment and contributed to the rapid unraveling that followed, culminating in TerraUSD’s permanent depeg and the near-total destruction of LUNA’s value.
Jump Trading has forcefully rejected the allegations, describing the lawsuit as baseless and characterizing it as an attempt by Terraform Labs’ estate to shift blame away from the admitted misconduct of Terra founder Do Kwon. Jump has stated it intends to vigorously defend itself in court. The firm’s response comes against a backdrop of prior regulatory action, including a $123 million settlement with the U.S. Securities and Exchange Commission in October 2024 related to claims about TerraUSD market support, a settlement Jump agreed to without admitting wrongdoing.
The lawsuit unfolds alongside the final stages of Do Kwon’s own legal reckoning. Kwon pleaded guilty to criminal charges tied to fraud and market manipulation and was sentenced earlier this month to 15 years in prison, closing one chapter of the Terra saga while opening another focused squarely on the role of institutional counterparties. As of late 2025, Terraform’s estate has reportedly recovered roughly $300 million for creditors, a fraction of the losses incurred but a figure the plan administrator hopes to materially increase through litigation.
Beyond the immediate legal battle, the case is reverberating through the stablecoin sector at a moment of heightened regulatory and market scrutiny. Analysts note that stablecoins now underpin a global supply estimated at more than $300 billion, with trillions of dollars in on-chain transaction volume, making their integrity central to broader crypto price formation, crypto price index benchmarks, and overall coin market cap calculations. Allegations that a major stablecoin’s peg was sustained through undisclosed market-making agreements rather than transparent reserves or algorithms challenge assumptions about how stability is achieved and measured.
The timing is notable as lawmakers and regulators tighten frameworks governing stablecoins, including new U.S. legislation aimed at payment stablecoins and clearer rules around disclosures and reserve management. Market participants increasingly view the Terra-Jump dispute as a test case that could influence how much responsibility liquidity providers and trading firms bear when their behind-the-scenes actions materially affect market outcomes. As courts examine whether hidden stabilization arrangements constitute material information, the lawsuit may ultimately shape how future stablecoin projects design, disclose, and defend the mechanisms that keep their tokens trading at a dollar.
This article has been refined and enhanced by ChatGPT.
