Jump Trading Hit With $4 Billion Lawsuit Over Terra Collapse

The Jump lawsuit accuses the trading giant of manipulating and exploiting the Terra ecosystem ahead of its $40 billion implosion. Meanwhile, US prosecutors secured a nearly six-year prison sentence against a senior IcomTech promoter for running a crypto Ponzi scheme.

Jump Trading Sued Over Terra Collapse

The court-appointed administrators winding down the remnants of Do Kwon’s collapsed Terraform Labs launched a legal attack on one of the crypto industry’s most powerful trading firms. It accused Jump Trading of profiting from Terra’s rise while helping set the stage for its catastrophic implosion.

Todd Snyder, the plan administrator overseeing Terraform’s bankruptcy, filed a lawsuit in federal court in Illinois seeking $4 billion in damages from Jump Trading, its co-founder William DiSomma, and former Jump Crypto president Kanav Kariya. The Wall Street Journal first reported the filing, which alleges that Jump engaged in market manipulation, concealment, and self-dealing in the Terraform ecosystem to enrich itself at the expense of retail investors.

According to Snyder, Jump Trading actively exploited Terraform’s structure during its peak, benefiting from the growth of the TerraUSD stablecoin and its sister token Luna, before distancing itself as the system unraveled. In a statement, Snyder described the lawsuit as a necessary step to hold Jump accountable for conduct that directly contributed to what he characterized as the largest collapse in crypto history.

Terraform’s downfall was one of the most traumatic events in digital asset markets. TerraUSD, or UST, was an algorithmic stablecoin that was designed to maintain a one-dollar peg through an arbitrage mechanism tied to Luna. When UST lost that peg in May of 2022, confidence evaporated almost instantly. The algorithm failed under pressure, which triggered a death spiral that sent both tokens toward near-zero values in a matter of days. Roughly $40 billion in market value was wiped out, setting off a chain reaction that battered lenders, hedge funds, and exchanges across the industry.

The contagion spread quickly. Firms that relied on UST yields and Luna liquidity as reliable collateral were forced into distress. Three Arrows Capital was one of the earliest high-profile casualties. As leverage unwound and trust collapsed, even more failures followed.

Snyder’s complaint alleges that Jump previously entered into a quiet arrangement to support UST’s peg ahead of its final collapse, only to exit with big profits once the structure broke down. Regulators also scrutinized Jump’s role, with the SEC stating in court filings that the firm earned roughly $1 billion from trading Luna.

In other legal news, a senior promoter tied to the collapsed crypto platform IcomTech was sentenced to almost six years in federal prison for his role in a multimillionion-dollar Ponzi scheme that preyed on working-class, Spanish-speaking investors across the United States. Magdaleno Mendoza was sentenced on Thursday to 71 months in prison, according to the US Attorney’s Office for the Southern District of New York.

Announcement from the US Attorney’s Office

Prosecutors said Mendoza played a central role in promoting IcomTech, a purported cryptocurrency mining and trading company that launched in mid-2018 and unraveled by the end of 2019. The platform promised investors guaranteed daily returns, and marketed itself as a pathway to financial freedom through crypto. In reality, authorities said, IcomTech operated as a classic multi-level marketing Ponzi scheme by using money from new investors to pay earlier participants while senior promoters siphoned off large sums for personal use.

Court filings show Mendoza was among IcomTech’s most senior promoters and maintained close ties with the company’s founder, David Carmona. He hosted recruitment events at his own restaurant in the Los Angeles area, where attendees handed over large amounts of cash after being pitched on the platform’s supposed profitability. 

Promoters also traveled across the country hosting flashy expos, arriving in luxury vehicles and designer clothing to project an image of success. Investors were shown online dashboards that displayed growing balances, though many later discovered they could not withdraw their funds.

By August of 2018, complaints began to mount as investors faced delays and excuses when attempting to cash out. In response, IcomTech introduced a proprietary token called “Icoms,” which promoters claimed would eventually be used for payouts. The token ultimately proved worthless and only compounded losses for victims who already sunk their savings into the scheme. Between 2018 and 2019, IcomTech promised investors returns of up to 100% every six weeks.

In addition to his prison sentence, Mendoza was ordered to pay almost $790,000 in restitution and to forfeit $1.5 million, along with his home in Downey, California, which authorities said was purchased using proceeds from the fraud. The sentencing also covered Mendoza’s illegal reentry into the United States after deportation. Prosecutors said he was removed from the country four times, including once under a false identity, and continued promoting crypto Ponzi schemes even after IcomTech collapsed.