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Allegations of profit from price manipulation
Jump Trading, a major investor in Terraform Labs, was sued today for its role in manipulating the price of the stablecoin TerraUSD (UST).
US-based Jump Trading also acted as a market maker, providing market liquidity.
The complaint, filed in the Illinois District Court in the United States, accuses Taewoo Kim of purchasing UST or a related token, Anchor UST (aUST), in the United States between May 2021 and May 2022, resulting in damages. It is in the form of a class action lawsuit on behalf of all persons affected by the lawsuit.
Plaintiffs allege that Jump Trading colluded with Do Kwon and his company, Terraform Labs, to manipulate the price of UST and AUST for its own benefit. This has cost token holders billions of dollars in damages.
Last year, the uncollateralized stablecoin UST deviated from the US dollar price, and the old Terra ecosystem collapsed. It is still fresh in our memory that it led to the bankruptcy of various virtual currency companies.
connection: South Korean prosecutors to investigate all Terraform Labs employees over UST drop = report
What is a stablecoin
A cryptocurrency whose price is always stable. Stablecoins are a type of cryptocurrency, and unlike volatile assets such as BTC, ETH, and XRP, the purpose is to maintain its value ($1) backed by the US dollar. In addition to US dollar-backed stablecoins (USDT/USDC), there are also stablecoins that use algorithms.
Cryptocurrency Glossary
Complaint content
According to the filing, Jump Trading has entered into a contract to borrow tens of millions of LUNA tokens from Terraform Labs and make a market in trading LUNA, UST and aUST.
The deal allowed Jump Trading to purchase LUNA at a significant discount, allowing Jump Trading to resell it on the market at a profit.
Plaintiffs say Terra’s algorithm failed to lock the price of UST at $1 in May 2021, about a year before the Terra ecosystem actually collapsed. At the time, Terraform Labs went on to say that it had conspired with Jump Trading to covertly manipulate the market prices of UST and AUST without making this public.
Jump Trading reportedly bought over 62 million UST tokens in May 2021, boosting the price of UST and AUST. Plaintiff alleges that:
In return for market manipulation, Terraform Labs and Do Kwon agreed to amend their previous agreement and transfer LUNA tokens to Jump Trading at a discount of more than 99% off the then market price.
Jump Trading then resold these LUNA tokens on the market with a profit of over ¥173.8 billion ($1.28 billion).
Plaintiffs say such conduct violates, among other things, the Commodity Exchange Act and regulations of the Commodity Futures Trading Commission (CFTC).
He also pointed out that price maintenance through market manipulation cannot be done indefinitely, and as a result, the entire Terra ecosystem, including UST and LUNA, completely collapsed in May 2022.
SEC lawsuit
In February, the US Securities and Exchange Commission (SEC) sued Terraform Labs and Do Kwon for orchestrating securities fraud.
The SEC complaint also alleges that Terraform Labs enlisted an unnamed US company to manipulate the market price of UST. Plaintiffs in the class action lawsuit speculate that the company was Jump Trading.
connectionSEC sues former Terra founder Do Kwon for securities fraud
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