Jump Trading Allegedly Profited $1.3 Billion From Price Manipulation TerraUSD

Key Points:

• Market maker Jump Trading and CEO Kanav Kariya are accused of manipulating the TerraUSD token price.
• Terra and Kwon have agreed to amend their previous agreements and transfer over 61.4 million LUNA tokens to Jump at a 99% discount.
• Jump subsequently resold the tokens for a profit of over $1.28 billion.

A lawsuit has been filed in Illinois district court alleging that Jump Trading engaged in price manipulation of TerraUSD (UST), an algorithmic stablecoin, through a partnership with Terraform Labs.

According to court documents, Jump Trading purchased millions of UST tokens in 2021 to manipulate their value to reach $1, violating the Commodity Exchange Act and CFTC regulations. The lawsuit also accuses Jump of getting rich illegally. Jump is the leading financial backer of Terraform Labs and has borrowed tens of millions of LUNA tokens in exchange for market-making services for transactions in LUNA, UST, and aUST.

Specifically, in May 2021, when the UST stablecoin algorithm failed to maintain a fixed $1, Terraform and its CEO Do Kwon allegedly coordinated transactions with Jump to manipulate the market price for UST and aUST. To encourage Jump manipulation, Terra and Kwon agreed to amend their previous agreements and transfer over 61.4 million LUNA tokens to Jump at a high discount. Jump later sold back with a profit of more than 1.28 billion USD.

The US Department of Justice is investigating the stablecoin collapse, and prosecutors are examining a chat group discussion involving Jump Trading, Alameda Research, and Jane Street Group about a potential bailout for stablecoin TerraUSD. Do Kwon was arrested in March for allegedly using fake documents and is currently under house arrest after being released on bail.

The stablecoin crash caused a $40 billion wipeout in the Terra ecosystem last May. The Federal Bureau of Investigation and New York’s Southern District Attorney’s Office have recently questioned former employees at Terraform Labs as part of their investigation.

The allegations in the lawsuit are serious and, if proven, could have significant consequences for Jump Trading and CEO Kanav Kariya. In addition to the legal and regulatory implications, the allegations could damage Jump’s reputation and erode confidence in the cryptocurrency market.

The US Department of Justice is also investigating the collapse of stablecoins, which contributed to the wipeout of $40 billion in the Terra ecosystem last May. Two agencies within the department – the Federal Bureau of Investigation and the Southern District Attorney’s Office of New York – have questioned former employees at Terraform Labs in recent weeks.

As mentioned in the previous article, as regulators crack down on the crypto industry, market makers Jane Street and Jump Trading are pulling out of the US crypto exchange market.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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