New Lawsuit Over Terra Collapse

The collapse of the Terra ecosystem continues to generate serious legal consequences. The bankruptcy administrator of Terraform Labs has filed a $4 billion lawsuit in the United States against Jump Trading and two of its former executives. The case could reveal new details about one of the largest crises in the history of the cryptocurrency market.

The lawsuit was filed in federal court in the Northern District of Illinois by Todd Snyder, the court-appointed administrator overseeing the liquidation of Terraform Labs. The defendants include Jump Trading LLC, its co-founder William DiSomma, and Kanav Kariya, the former head of Jump Crypto.

According to the complaint, Jump Trading played a central role in both the rise and the collapse of the Terra ecosystem. As early as 2019, the firm allegedly entered into undisclosed agreements with Do Kwon, the founder of Terraform Labs. These arrangements allowed Jump to purchase large amounts of the LUNA token at heavily discounted prices, while publicly presenting itself as a neutral market participant.

The lawsuit also revisits events from May 2021, when TerraUSD temporarily lost its peg to the US dollar. At the time, Jump is accused of secretly buying tokens to help restore the peg. Publicly, however, the recovery was attributed to Terra’s algorithmic design, strengthening investor confidence and reducing regulatory scrutiny.

Another key allegation concerns the removal of restrictions on Jump’s ability to sell its LUNA holdings. This reportedly enabled the firm to liquidate tokens quickly at much higher prices, generating profits of nearly $1 billion. During the final market collapse in May 2022, the complaint also alleges that nearly 50,000 bitcoins were transferred from the Luna Foundation Guard to Jump without a formal agreement.

The bankruptcy administrator argues that Jump’s actions amounted to market manipulation and concealment of material facts, benefiting the firm at the expense of investors. The collapse of Terra wiped out approximately $40 billion in market value and triggered a broader contagion across the crypto sector.

Jump Trading has not publicly commented on the lawsuit. DiSomma and Kariya previously invoked their Fifth Amendment rights in other proceedings, and Kariya left the firm last year. The case adds to a growing list of legal actions related to Terra. In December 2024, a Jump affiliate agreed to pay $123 million to settle charges with the US Securities and Exchange Commission. Terraform Labs itself reached a settlement with regulators totaling around $4.5 billion, while Do Kwon was sentenced to 15 years in prison for fraud.

If the case proceeds, the discovery process could uncover internal communications and trading records that may reshape how the role of major trading firms in the Terra collapse is understood.