The bankruptcy administrator of Terraform Labs has sued the popular proprietary trading firm, Jump Trading, for allegedly profiting from and contributing to the crypto company's collapse in 2022, the Wall Street Journal reported on Dec. 18.
Launched in 2018, Terraform Labs was one of the leading crypto companies a few years ago.
But the project's twin cryptocurrencies, TerraUSD (UST) and LUNA, collapsed in 2022 and even led to investor losses worth an estimated $40 billion.
Related: 15-year jail sentence may not be enough for Chapter 11 crypto founder
Terraform Labs founder Do Kwon was arrested by Montenegrin authorities when he was attempting to flee to Dubai in March 2023.
After his extradition to the U.S., the court found him guilty of nine charges, including fraud and money laundering, and recently sentenced him to 15 years in prison and asked him to forfeit $19 million worth of illicit gains.
Even the South Korean authorities could begin a separate trial against Do Kwon and he could reportedly receive additional punishment in the country.
As far as Terraform Labs is concerned, the crypto company filed for Chapter 11 bankruptcy in the U.S. in January 2024. The firm received a court approval in September 2024 to wind down its operations in bankruptcy.
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Lawsuit seeks $4 billion in damages
The court appointed Todd Snyder as Terraform Labs' bankruptcy plan administrator. It is a court-appointed role that involves managing a company's finances during bankruptcy to make sure the process is fair, legal, and orderly.
As per the WSJ report, Snyder sued Jump Trading, co-founder William DiSomma, and former president Kanav Kariya in the U.S. District Court for the Northern District of Illinois, Eastern Division, on Dec. 18.
Snyder held Jump responsible for alleged market manipulation, self-dealing, and misuse of assets so that the proprietary trading firm could enrich itself and leave crypto investors to bear the losses.
Jump made billions of dollars by "actively" manipulating the Terraform Labs ecosystem to hike the value of TerraUSD before the stablecoin lost its dollar peg and collapsed, the administrator alleged. WSJ quoted Snyder,
"This action is a necessary step to hold Jump Trading accountable for illegal conduct that directly caused the largest crypto collapse in history."
Snyder is seeking $4 billion in damages from Jump.
The proprietary trading firm profited nearly $1 billion by selling Luna, WSJ added.
Reportedly, a Jump Trading spokesperson said the company will defend itself against the claims as the lawsuit is a "desperate attempt" to shift blame away from Terraform and Kwon.
TheStreet Roundtable reached out to Jump Trading for a comment on the matter and has not received a response so far. We will update the story if and when the company responds.
Related: New property rules aim to safeguard investors during crypto bankruptcies
This story was originally published by TheStreet on Dec 19, 2025, where it first appeared in the Bankruptcy News & Analysis section. Add TheStreet as a Preferred Source by clicking here.
