Terraform Labs Sues Jump Trading for Four Billion Dollars Over Role in Terra Collapse

The legal fallout from the collapse of the Terra ecosystem has widened once again as the court-appointed liquidator for Terraform Labs filed a lawsuit seeking four billion dollars in damages from trading firm Jump Trading and two of its senior leaders.

According to a report published by The Wall Street Journal on December 18, the complaint was submitted in a federal court in the Northern District of Illinois by Todd Snyder, who oversees the wind down of Terraform Labs after its bankruptcy.

Allegations of secret deals and market manipulation

The lawsuit names Jump Trading, its co-founder William Di Soma, and former head of Jump Crypto Kanav Kariya as defendants. The filing alleges that Jump established covert arrangements with Do Kwon as early as 2019, allowing it to buy large quantities of the LUNA token at steep discounts while presenting itself publicly as a neutral participant in the market.

According to the complaint, Jump stepped in quietly during the May 2021 crisis to purchase LUNA and restore its dollar peg. In public, the recovery was attributed to the algorithmic design of Terraform Labs, which further boosted confidence in the system and helped the company avoid deeper scrutiny from regulators.

The filing claims Jump later received permission to lift vesting restrictions on its LUNA holdings, enabling it to sell tokens more quickly and at significantly higher prices. Prosecutors say these trades earned nearly one billion dollars in profit.

Unapproved transfer of Bitcoin reserves

The lawsuit also states that almost fifty thousand bitcoin were transferred from the Luna Foundation Guard to Jump during the final weeks before Terra’s collapse in May 2022, without a formal agreement. The filing argues that these transfers show the extent of Jump’s influence and the depth of its involvement in Terra’s market operations.

Terraform Labs collapsed shortly afterward, erasing an estimated forty billion dollars in market value and triggering a chain reaction that affected lenders, exchanges, and hedge funds across the crypto sector.

Jump Trading has not commented publicly on the new lawsuit. Both Di Soma and Kariya previously invoked their Fifth Amendment rights in related investigations, and Kariya departed Jump in 2024.

A growing list of legal battles

The new case adds to a long list of legal problems tied to Terra. In December 2024, a Jump affiliate agreed to pay 123 million dollars to settle allegations from the U.S. Securities and Exchange Commission related to misleading statements about TerraUSD’s stability. Terraform Labs also reached a settlement nearing 4.5 billion dollars with American regulators, largely addressed through bankruptcy proceedings. Earlier this year, Do Kwon received a fifteen year prison sentence for fraud.

If the lawsuit proceeds, discovery could reveal internal communications and trading records that shed new light on the inner workings of Terra’s final months. Such disclosures may reshape the understanding of how major trading firms influenced the collapse and could have lasting implications for future regulatory oversight of digital asset markets.