Do Kwon's Terra Downfall Expands: Jump Trading Hit with $4 Billion Lawsuit Over Alleged Ecosystem Manipulation

The collateral damage from Do Kwon’s Terraform Labs implosion continues to mount. Beyond the founder’s recent 15-year prison sentence handed down in December 2025, the bankruptcy administrator is now pursuing a separate $4 billion lawsuit against Jump Trading, accusing the high-frequency trading firm of systematically exploiting and profiting from the Terra ecosystem’s spectacular failure.

Todd Snyder, appointed to wind down Terraform Labs’ operations following the company’s January 2024 bankruptcy filing, is seeking damages from Jump Trading, its co-founder William DiSomma, and Kanav Kareiya, who rose from intern status to become the platform’s president. The lawsuit alleges that Jump Trading engaged in what amounts to opportunistic market manipulation during Terra’s crisis.

Do Kwon’s Legal Reckoning

The Jump Trading lawsuit arrives at a critical moment for Do Kwon personally. The Terraform Labs founder, who launched the venture in 2018, pleaded guilty in August 2025 to two criminal fraud counts. Just months later, in mid-December 2025, he was sentenced to 15 years in prison—a stark culmination of investigations into the massive collapse that devastated hundreds of thousands of retail investors worldwide.

Jump Trading’s Alleged Scheme

According to the Illinois district court filing, Jump Trading is accused of having a secret arrangement to artificially support UST before its inevitable crash. Rather than share in Terra’s downfall alongside other market participants, the trading firm allegedly maneuvered to walk away with substantial profits even as the ecosystem imploded.

Snyder’s statement to the media was unambiguous: “Jump Trading actively exploited the Terraform Labs ecosystem through manipulation, concealment, and self-dealing that enriched Jump while financially devastating thousands of unsuspecting investors. This action is a necessary step to hold Jump Trading accountable for illegal conduct that directly caused the largest crypto collapse in history.”

Documents referenced by the Wall Street Journal indicate Jump Trading generated approximately $1 billion from Luna token sales during the chaos, according to prior SEC filings.

The Terra Implosion and Market Spillover

The original catastrophe unfolded in 2022 when Terraform Labs’ algorithmic stablecoin TerraUSD (UST) lost its dollar peg, triggering a market cascade that sent its sister token Luna toward zero within days. The $40 billion value destruction set off a domino effect across crypto markets, destabilizing platforms and funds industry-wide.

By November 2022, the contagion had reached Sam Bankman-Fried’s FTX exchange, which subsequently collapsed and became emblematic of the sector’s broader fragility. The damage prompted regulatory action: in 2024, Terraform Labs agreed to pay approximately $4.5 billion to the SEC to settle civil securities fraud allegations.

Do Kwon’s prison sentence, combined with this new $4 billion claim against Jump Trading, represents ongoing legal and financial accountability for what many regard as the most significant downturn in cryptocurrency’s history.