Terraform Labs liquidator sues Jump Trading for $4 billion in damages

The administrator overseeing Terraform Labs’ liquidation has sued Jump Trading and its top executives, seeking to hold them liable for the firm’s multibillion-dollar collapse in 2022.

According to a Wall Street Journal report, Terraform Labs’ court-appointed plan administrator, Todd Snyder, is seeking $4 billion in damages from Jump, co-founder William DiSomma, and former president Kanav Kariya, who left the firm in 2024. The company confirmed the report in a social media post.

Terraform Labs, led by founder Do Kwon, collapsed in 2022 when its algorithmic stablecoin TerraUSD depegged, falling into a death spiral alongside its sister cryptocurrency Luna. This wiped out over $40 billion from the market, causing a brutal contagion that triggered a wave of bankruptcies across the crypto lending industry.

After unsuccessful attempts to revive the ecosystem, Terraform filed for bankruptcy in 2024. Following the bankruptcy, the company agreed to pay the Securities and Exchange Commission $4.47 billion in penalties. Last week, Kwon was sentenced to 15 years in U.S. prison following his guilty plea to two criminal counts back in August. 

Snyder claimed that Jump “actively exploited” the Terraform Labs ecosystem by entering into a backdoor deal to inflate the value of algorithmic stablecoin TerraUSD before it imploded. The administrator is alleging that Jump profited 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, according to the WSJ.

SEC’s findings

Such secret dealings between Terraform and Jump were previously detailed in findings by the SEC. 

The SEC said last year that Jump’s crypto unit Tai Mo Shan stepped in to buy $20 million worth of TerraUSD in May 2021 after the stablecoin briefly lost its dollar peg. In exchange, Tai Mo Shan received unlocked Luna tokens early, which it was able to sell into the market. 

Through this deal, Jump and Terraform misled investors about the efficacy of the stablecoin’s mechanism, the SEC said, in a complaint that accused Tai Mo Shan of making $1.28 billion from the deal. The SEC and Tai Mo Shan reached an agreement for the latter to pay about $123 million in fines.

Meanwhile, a spokesperson for Jump reportedly described the lawsuit as a “desperate attempt” to shift blame and responsibility away from Terraform and Kwon, stating that the company will vigorously defend itself against the claims. 

So far, around $300 million worth of assets have been recovered for creditor compensation, according to the WSJ report.

The Block has reached out to Terraform, Jump and Kariya for further comment.

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