Terraform liquidator sues Jump Trading for $4B, alleging secret UST propping and discounted LUNA deals
Todd Snyder, court-appointed liquidator for Terraform Labs, has filed a $4 billion lawsuit against Jump Trading and two former executives, alleging undisclosed agreements that propped algorithmic stablecoin UST and yielded discounted LUNA allocations Jump later sold for large profits. The complaint says contracts with Jump dated back as early as 2019 and included LUNA purchases at steep discounts (example cited: ~$0.40 per token versus later market highs above $110). It alleges a “gentlemen’s agreement” under which Jump intervened during stress events—notably the May 2021 UST de‑peg—buying UST to restore the peg while Terraform publicly credited its algorithm. Later contract changes allegedly removed vesting and lockups, allowing Jump to sell monthly LUNA allocations immediately; the liquidator claims Jump realized roughly $1.28 billion from LUNA sales and that its actions contributed to the broader Terra/Luna collapse in May 2022. Jump denies wrongdoing and says it will defend itself; its crypto unit Tai Mo Shan previously settled SEC charges for about $123 million without admitting fault. The suit aims to recover large damages and could broaden legal scrutiny of off‑book liquidity arrangements and the disclosure duties of market makers. For traders: the case increases regulatory and legal risk around market‑making practices and algorithmic stablecoins, may trigger renewed volatility and negative sentiment for legacy Terra ecosystem tokens, and sets a potential precedent for claims against other liquidity providers.
Bearish
The lawsuit increases legal and regulatory risk tied directly to the Terra ecosystem tokens (UST/LUNA). Allegations that a major market maker secretly propped UST and later sold discounted LUNA holdings amplify counterparty and disclosure concerns. In the short term, traders can expect higher volatility and negative sentiment for legacy Terra‑linked tokens as the market prices in potential recoveries, litigation costs and reputational spillovers. In the medium to long term, the case could reduce confidence in off‑book liquidity arrangements and algorithmic stablecoins, dampening speculative demand and liquidity for related tokens. Although Jump denies wrongdoing, the headline risk alone is likely to suppress price appetite for LUNA and any relisted or forked Terra tokens until legal outcomes are clearer.