Terraform Labs Liquidator Seeks $4 Billion From Jump Trading Over 2022 Crypto Collapse

The court-appointed administrator overseeing the liquidation of Terraform Labs has filed a sweeping lawsuit against Jump Trading and two of its senior executives, seeking $4 billion in damages tied to the crypto firm’s dramatic collapse in 2022.

According to reporting by The Wall Street Journal, Terraform’s plan administrator, Todd Snyder, has brought claims against 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 public statement.

Terraform Labs, founded by Do Kwon, unraveled in May 2022 after its algorithmic stablecoin TerraUSD lost its peg to the U.S. dollar. The breakdown triggered a rapid collapse of the Terra ecosystem, including its companion token Luna, erasing more than $40 billion in market value and sending shockwaves through the broader crypto industry. The fallout contributed to a series of high-profile failures among crypto lenders and trading firms.

After efforts to revive the project failed, Terraform filed for bankruptcy in 2024. As part of the proceedings, the company agreed to pay $4.47 billion in penalties to the U.S. Securities and Exchange Commission. Kwon, who had been at the center of the project, was sentenced last week to 15 years in a U.S. prison after pleading guilty to two criminal charges earlier this year.

In the newly filed lawsuit, Snyder alleges that Jump Trading played a direct role in propping up TerraUSD before its eventual collapse. He claims Jump entered into undisclosed arrangements that artificially supported the stablecoin’s price, allowing it to appear functional while fundamental risks remained unresolved. According to the filing, Jump allegedly earned billions of dollars from the arrangement.

“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, as quoted by the Journal.

The claims echo earlier findings by the SEC, which detailed interactions between Terraform and Jump’s crypto arm, Tai Mo Shan. The regulator alleged that in May 2021, after TerraUSD briefly slipped from its dollar peg, Tai Mo Shan purchased roughly $20 million worth of the token. In return, it received early access to unlocked Luna tokens, which it later sold on the open market.

The SEC said these transactions gave investors a misleading impression that TerraUSD’s stabilization mechanism was working as designed. In its complaint, the agency estimated that Tai Mo Shan earned about $1.28 billion from the deal. The matter was later settled, with Tai Mo Shan agreeing to pay approximately $123 million in penalties.

Jump Trading has rejected the latest lawsuit’s allegations. A company spokesperson reportedly described the legal action as an attempt to deflect responsibility away from Terraform and its founder, adding that Jump intends to defend itself vigorously.

So far, about $300 million in assets has been recovered to compensate creditors, according to the Journal. Whether the lawsuit against Jump will significantly increase that figure remains an open question.