FractureLabs, known for their online game “Decimated,” has initiated legal action against Jump Trading, accusing the entity of manipulating the cryptocurrency market, as reported by Bloomberg News on October 16.
Key Allegations Against Jump Trading
The lawsuit claims that Jump Trading was involved in a “pump and dump” scheme targeting the game’s token, DIO, which is actively traded on cryptocurrency exchanges.
Background of the Case
The legal complaint outlines that FractureLabs intended to secure funding through an initial token offering of DIO on the HTX exchange (previously known as Huobi) and engaged Jump Trading to act as a market maker back in 2021.
- FractureLabs granted a loan of 10 million DIO tokens to Jump’s subsidiary.
- An additional 6 million tokens were sent to HTX for the purpose of sale.
The Price Manipulation Claims
After witnessing a substantial increase in the token’s value to $0.98, Jump allegedly sold off its holdings, which led to a significant drop in DIO’s price, plummeting to below $0.005. Following this, they reportedly repurchased the tokens at drastically lower prices, returned them to FractureLabs, and terminated their market-making agreement.
Violations and Financial Implications
FractureLabs contends that Jump misled them regarding its intentions and failed to adhere to the agreed-upon strategy to maintain the token’s price within a specific range as per Huobi’s listing requirements. Consequently, HTX retained a substantial portion of a $1.5 million Tether (USDT) deposit from FractureLabs, which is now being pursued in arbitration.
HTX has refrained from commenting on the matter due to ongoing legal proceedings but has reiterated its commitment to compliance with legal standards.
Historical Context and Previous Controversies
This development adds to a series of controversies surrounding Jump Crypto. In earlier litigation initiated by the US Securities and Exchange Commission (SEC) against Terraform Labs in February 2023, the SEC referred to Jump as “instrumental” in the destabilization of the UST stablecoin.
While Jump is not a direct defendant in the Terraform Labs case, the SEC highlighted that Jump was involved in efforts to restore UST’s value when it first lost its dollar peg in May 2021.
Further complicating the situation, the US Commodity Futures Trading Commission (CFTC) has reportedly begun investigating Jump’s practices within the cryptocurrency sector, although this inquiry does not imply any wrongdoing on their part.