Jump Trading is being sued by Taewoo Kim on behalf of affected investors, alleging that the company conspired to manipulate the price of TerraUSD (UST), resulting in the stablecoin’s significant collapse. The lawsuit accuses Jump Trading of acquiring substantial amounts of UST to artificially influence its value towards $1, deceiving investors about the true price and associated risks of the token.
The legal action claims that Jump Trading collaborated with Do Kwon, the former CEO of Terraform Labs, in an effort to drive up the price of UST. It also highlights that Jump Trading had been an early partner and financial supporter of Terraform Labs.
Instead of acknowledging the failure of Terraform Labs’ algorithm to maintain UST’s advertised peg price, the lawsuit alleges that Terraform Labs and Kwon secretly conspired with Jump Trading to manipulate the market prices of UST and aUST through coordinated trades, artificially propping up UST to its $1 peg.
According to the lawsuit, Jump Trading purchased over 62 million tokens between May 23 and May 27, 2021, executing the transactions across multiple cryptocurrency exchanges to conceal their manipulative actions.
The plaintiff accuses Jump Trading and its CEO, Kanav Kariya, of violating the Commodity Exchange Act, Commodity Futures Trading Commission (CFTC) regulations, and unjust enrichment under common law.
The scheme allegedly allowed Jump Trading to reap enormous profits exceeding $1.28 billion by selling the heavily discounted LUNA tokens acquired through the modified agreement. The lawsuit references the SEC’s legal filing against Terraform Labs and Do Kwon, which suggested that they sought assistance from an unnamed US trading firm to manipulate the market price of UST. Taewoo Kim’s lawsuit speculates that the unnamed firm is Jump Trading.
In a separate development, Jump Trading’s crypto division, Jump Crypto, is reportedly scaling back its digital asset trading activities in the US due to increased regulatory pressure. The company has faced regulatory scrutiny following the recent crypto market downturn and the subsequent collapse of several prominent crypto firms. While Jump Trading will continue to engage in cryptocurrency markets, it plans to do so on a smaller scale and does not intend to completely withdraw from the crypto space.
Do Kwon, who was previously arrested in March in Montenegro, has been released on bail of 400,000 euros ($440,320) pending trial on local charges.
