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Last week, market-making giant Jump Trading made headlines again in the crypto world, but unfortunately, it wasn’t for positive reasons. Fracture Labs, a blockchain game developer, filed a lawsuit in the U.S. District Court of Illinois, accusing Jump Trading of manipulating the price of the DIO token for profit through a pump-and-dump scheme.
Launched in 2021, DIO was the token of Fracture Labs’ game Decimated. According to the lawsuit, Fracture Labs had entered into a market-making agreement with Jump Trading before the token’s issuance, lending the market maker 10 million DIO tokens worth approximately $500,000 for market-making purposes. Soon after its release, DIO peaked at $0.98. However, instead of helping stabilize the token price, Jump Trading began selling off DIO and profited millions of dollars in the process.
The mass sell-off caused DIO’s price to crash to around $0.005. Subsequently, Jump Trading repurchased the 10 million DIO tokens for only about $53,000 and returned them to Fracture Labs. The game developer alleged that Jump Trading’s actions violated their agreement and caused significant losses, and was now seeking compensation. Jump Trading has yet to publicly respond to the lawsuit.
The last time Jump Trading drew widespread attention in the crypto space was in early August when their massive sell-off of ETH sparked panic and was blamed as one of the factors for the crypto market crash. This had fueled speculation that Jump Trading might have been distancing itself from the crypto market.
As one of the most successful market makers in the crypto space, Jump Trading’s crypto division, Jump Crypto, has been facing challenges since the collapse of FTX. Among them, the company’s connection to Do Kwon and Terraform Labs has been a notable issue. The U.S. Securities and Exchange Commission (SEC), in its lawsuit against Do Kwon and Terraform Labs, revealed that Jump Crypto had helped Terraform Labs intervene in the market during the de-pegging of stablecoin UST in May 2021, and received substantial amounts of LUNA in return. Although Jump Crypto was not directly charged, the incident tarnished its reputation.
In June, the U.S. Commodity Futures Trading Commission (CFTC) launched an investigation into Jump Crypto, and just days later, the company’s former president Kanav Kariya resigned. Now, in the midst of these troubles, Jump Trading is dragged into a lawsuit. As a prominent player in the crypto industry, its fate could not only impact the market but also potentially shape the future landscape of crypto regulation.
