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Jump Trading Hit with $1.3B Lawsuit for Terra Manipulation
Jump Trading accused of buying over 62M UST tokens to inflate its price.
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Jump Trading Group’s crypto division has been sued for conspiring with Terraform Labs to manipulate TerraUSD’s (UST) price following the stablecoin’s unprecedented collapse. The $1.3 billion class-action lawsuit alleges that Jump bought 62 million UST tokens to propel its price back up.
Jump Trading Allegedly Bought UST to Recover its Dollar Peg
Jump Trading, a US-based firm focused on algorithmic and high-frequency trading strategies, is facing a $1.3 billion class-action lawsuit over allegations that it had manipulated the price of the collapsed UST token. The lawsuit was filed on behalf of affected investors by Taewoo Kim, a New Jersey resident who claims that Jump Trading was also an early partner of Terraform Labs, the blockchain project behind UST.
In the lawsuit, Kim alleges that shortly after the UST collapse in May 2021, Jump Trading and Terraform Lab’s then-CEO Do Kwon conspired to manipulate the prices of UST and aUST stablecoins artificially. To achieve this, Jump bought UST tokens, temporarily restoring UST’s price to the $1 peg, which previously dropped to as low as 12 cents.
Specifically, the lawsuit states that from May 23 to May 27, 2021, Jump Trading acquired more than 62 million tokens. The purchases were made across several crypto exchanges to hide its manipulative actions better, Kim says in the document.
In addition, Kwon’s Terraform Labs then agreed to transfer 61.4 million LUNA tokens to Jump at a fixed price of $0.40 per coin under the terms of an agreement signed in July 2021. The deal was supposed to remain in effect for the following four years without regard to LUNA’s actual market price.
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Kwon is to Be Released on $435K Bail in Montenegro
The crash of UST and LUNA erased around $60 billion from the digital currency space, and the event is seen as one of the biggest frauds in the crypto industry, alongside the FTX fiasco. Not long after the collapse, Kwon went missing, and his location remained unknown until his arrest in Montenegro in March 2023.
Last month, the 31-year-old was charged by authorities in Montenegro for passport forgery. Today, on May 12, reports revealed that Kwon would be released from Montenegro jail on supervised bail, according to a court notice. His lawyers paid 400,000 euros ($435,000) to bail him out.
Meanwhile, Jump Trading’s crypto arm is scaling its operations in the US, citing recent regulatory uncertainty, as reported by Bloomberg on Wednesday. While the trading firm plans to dial back its crypto activities, it will not exit crypto entirely.
What will happen next for Kwon and others responsible for the Terraform collapse? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
