Jump Trading is Sued for Alleged $1.3B in Profits From TerraUSD

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Last Updated on May 15, 2023 by Bitfinsider

Jump Trading is accused of conspiring with Terraform Labs to manipulate the price of the doomed algorithmic stablecoin TerraUSD (UST), according to a lawsuit filed in an Illinois district court. According to court documents from May 9, the company purchased millions of UST tokens in 2021 with the intention of manipulating their value to $1.

Plaintiff Taewoo Kim accuses Jump and its CEO Kanav Kariya of violating the Commodity Exchange Act, Commodity Futures Trading Commission (CFTC) regulations, and of unjust enrichment under common law.

According to the lawsuit, Jump Trading was an early partner and Terraform Labs’ primary financial supporter. Between November 2019 and September 2020, Jump entered into a number of agreements with Terraform and its affiliates “to borrow tens of millions of Terra LUNA tokens” and “provide market-making services for transactions in LUNA, UST, and aUST.”

In exchange, the agreements would allow Jump Trading to acquire LUNA tokens at a significant discount, which could then be resold for Jump’s own profit.

Jump allegedly purchased over 62 million UST tokens between May 23 and May 27, 2021, causing UST’s price to artificially increase to $1 and aUST’s price to rise.

To incentivize and reward Jump for its alleged market manipulation, Terra and Kwon “agreed to modify the parties’ prior agreements and instead unconditionally transfer to Jump more than 61.4 million LUNA tokens at a greater than 99.9% discount from their then-market price. According to the court filing, Jump resold the LUNA tokens for a staggering profit of over $1.28 billion.

Bloomberg reported on March 13 that United States prosecutors are investigating a Telegram chat group involving Jump Trading, Alameda Research, and Jane Street Group regarding a prospective TerraUSD stablecoin bailout.

The U.S. Department of Justice is also investigating the collapse of stablecoins, which contributed to a $40 billion loss in the Terra ecosystem in May 2022. In recent weeks, former Terraform Labs employees have been questioned by the Federal Bureau of Investigation and the U.S. Attorney’s Office for the Southern District of New York.

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