How Jump Trading allegedly manipulated UST into collapse

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Chicago Trading Firm Jump Trading Accused of Manipulating TerraUSD in Class Action Lawsuit

jump trading ust

In a shocking turn of events, Chicago-based trading firm Jump Trading is facing serious allegations of manipulating the price of algorithmic stablecoin TerraUSD (UST) in a class action lawsuit filed on May 9. These claims align with ongoing investigations by federal prosecutors in New York and suspicions raised by the Securities and Exchange Commission (SEC).

The lawsuit asserts that Jump Trading, along with its chief executive Kanav Kariya, violated the Commodity Exchange Act and other regulations set forth by the Commodity Futures Trading Commission (CFTC). Furthermore, it accuses the firm of unjust enrichment under common law.

According to the lawsuit, Jump Trading purportedly entered into a clandestine agreement with Do Kwon, co-founder of Terraform Labs (TFL), to manipulate the price of UST between May 23 and 27, 2021. Allegedly, Kwon informed investors that the loan from Jump Trading would bolster liquidity, mitigating concerns over UST’s lackluster performance.

The lawsuit goes on to claim that Jump Trading received over 61.4 million LUNA tokens, the native cryptocurrency of the Terra blockchain, at an astonishing discount exceeding 99% of the market price at the time. These tokens were purportedly provided by Kwon and Terraform Labs. Jump Trading allegedly later sold these tokens, amassing a staggering profit of $1.28 billion. It is reported that the trading firm acquired LUNA tokens for a mere $0.40 apiece, while they were trading for $90 on the open market.

The class action lawsuit echoes the concerns raised by prominent U.S. regulators. The SEC, in its lawsuit against Do Kwon, expressed suspicions that a secretive trading firm, likely Jump Trading, had previously intervened to stabilize UST’s peg in May 2021. During this period, UST briefly dipped below the $1 mark but unexpectedly regained its peg a few days later, prompting further scrutiny.

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Unidentified sources within the SEC have alleged that Jump Trading profited over $1.2 billion by selling the discounted LUNA tokens acquired from Kwon and Terraform Labs. Remarkably, this figure aligns with the claims made in the recently filed lawsuit.

Meanwhile, New York prosecutors have initiated their own investigation into the potential manipulation of UST by Jump Trading. Their examination reportedly includes analyzing messages exchanged on Telegram among the firm’s employees, aiming to uncover any evidence of wrongdoing.

In an attempt to conceal their collaboration, Jump Trading and Terraform Labs allegedly resorted to various tactics. However, one conspicuous detail emerged—Jump Crypto co-founder Kanav Kariya previously held a position on the governing council of the Luna Guard Foundation (LGF). During Terra’s supposed efforts to stabilize UST’s peg, the LGF astonishingly transferred 52,000 bitcoins to Jump Trading. To the bewilderment of investigators, these bitcoins appeared to vanish into thin air shortly afterward.

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