A recent class action lawsuit accuses Jump Trading, a Chicago trading giant, of purchasing substantial quantities of the UST stablecoin to manipulate its value towards $1, thereby misleading investors about its true price and risks. Jump allegedly played a substantial role in Terraform Labs’ (TFL) fraudulent scheme, causing at least $40 billion in financial losses for investors who put money into related cryptocurrencies.
The lawsuit claims that Jump Trading was an early partner and financial supporter of TFL, and through a series of agreements in 2019, TFL loaned 30 million LUNA tokens to Jump. This allowed the latter to provide market-making services for LUNA and UST in return for LUNA tokens at a significantly discounted rate.
In May 2021, the value of UST experienced an unexpected decline and fell below $1, eventually leading to Terra’s implosion. The lawsuit alleges that Kwon and Jump conspired to inflate the prices of UST and aUST, a token used on Terra’s lending platform, by Jump’s covert purchase of large quantities of UST, temporarily restoring the false appearance of UST’s $1 peg.
The accused parties allegedly misled the market about UST’s value and associated risks. It is said that between May 23 and May 27, 2021, Jump Trading engaged in significant net purchases of over 62 million UST tokens across multiple cryptocurrency trading platforms to conceal their manipulative actions. In return, TFL agreed to transfer 61.4 million LUNA tokens to Jump at a fixed price of $0.40 per token under an agreement signed in July 2021, regardless of LUNA’s actual market value, which often exceeded $90 per token in secondary markets.
It is claimed that as a result of this scheme, Jump made a staggering profit of more than $1.28 billion by selling the heavily discounted LUNA tokens it had acquired through the modified agreement. However, Kwon himself denies the possibility of manipulation, and the lawsuit points out a series of his tweets dismissing allegations of UST price manipulation from May 2021.
In light of the accusations, Jump Trading’s crypto division is reportedly scaling back its operations in the US market due to increased regulatory actions targeting the crypto industry. Despite the scale-back, the firm remains within the market-making sector on a smaller scale and doesn’t plan on entirely dismissing crypto investments.
As the debate over cryptocurrency regulations and manipulation continues to heat up, the outcome of this lawsuit may provide further insight into the inner workings of the ever-evolving world of blockchain and digital currencies.
Source: Blockworks
