a lawsuit archived in a district court in Illinois details Jump Trading's alleged involvement with Terra Labs in price manipulation of the algorithmic stablecoin TerraUSD (UST). According to court documents dated May 9, the company bought millions of UST tokens in 2021 hoping to manipulate their value to reach $1.
Plaintiff Taewoo Kim accuses Jump and its CEO, Kanav Kariya, of violating both the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) regulations, as well as unjust enrichment of common law. .
According to the lawsuit, Jump Trading was an early partner and major financial backer of Terraform Labs. Between November 2019 and September 2020, Jump entered into various agreements with Terraform and its affiliates "to borrow tens of millions of LUNA tokens" from Terra and "provide market making services for transactions in LUNA, UST and aUST."
In exchange, the deals would grant Jump Trading "the opportunity to purchase LUNA tokens at a deep discount, which could then be resold on the market to increase Jump's profits."
According to the presentation, in May 2021, exactly one year before Terra's ecosystem collapsed - UST's stablecoin algorithm was unable to maintain its $1 peg, prompting Terraform and its CEO Do Kwon to coordinate trades to prop up the token's price:
"Instead of publicly acknowledging the inability of TFL's algorithm to maintain UST's advertised fixed price (which was critical to the perceived market value of UST and aUST), TFL and Kwon secretly schemed with Defendant Jump to manipulate prices." of UST and aUST making secret and coordinated trades to prop up UST to its $1 peg."
The alleged scheme involved Jump purchasing more than 62 million UST tokens between approximately May 23-27, 2021, causing the price of UST to artificially rise to $1, which also increased the price of aUST further. .
To incentivize and reward Jump for its alleged manipulation of the markets, Terra and Kwon "agreed to amend the parties' prior agreements and instead unconditionally transfer over 61.4 million LUNA tokens to Jump at a discount of more than 99% of its current market. Jump later resold those LUNA tokens on the market at a staggering profit of over $1.28 billion,โ the court filing states.
Cointelegraph reached out to Jump Trading regarding the lawsuit, but did not receive an immediate response.
Bloomberg reported on March 13 that US prosecutors are examining a group chat discussion on Telegram involving Jump Trading, Alameda Research and the Jane Street Group regarding a possible rescue of the TerraUSD stablecoin.
The US Department of Justice is also investigating the collapse of the stablecoin, which contributed to a $40 billion destruction to the Terra ecosystem last May. Two agencies within the department, the Federal Bureau of Investigation and the US Attorney's Office for the Southern District of New York, have questioned former Terraform Labs employees in recent weeks.
Kwon was arrested in March in Montenegro for allegedly using false documents. South Korean and US authorities are seeking his extradition. He is currently under house arrest after being released on bail for 400,000 euros on May 12.
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