Jump is accused in the lawsuit of exploiting and manipulating the Terra eco-system ahead of Terra’s $40 billion collapse. US prosecutors have sentenced a top IcomTech official to nearly six years in prison for the operation of a cryptocurrency Ponzi scheme.
Jump Trading Sued Over Terra Collapse
Administrators appointed by the court to wind down Terraform Labs, the collapsed company of Do Kwon launched a lawsuit against one of the most influential trading firms in the cryptocurrency industry. Jump Trading was accused of profiting off Terra’s growth while setting the stage for Terra to collapse.
Todd Snyder, plan administrator for Terraform, has filed a suit in Illinois federal court, seeking damages of $4 billion from Jump Trading and its former Jump Crypto President Kanav Kariya. The Wall Street Journal was the first to report the lawsuit, in which Jump Trading is accused of engaging in market manipulation and concealment in order to enrich themselves at the expense retail investors.
Snyder claims that Jump Trading exploited Terraform during the peak of its structure, profiting from the TerraUSD stablecoin’s growth and the sister token Luna before distancing themselves as the TerraUSD system began to unravel. Snyder said that the lawsuit was a step necessary to make Jump Trading accountable for its conduct, which he described as directly contributing to the biggest collapse of crypto history.
Terraform’s demise was one of most traumatizing events on digital asset markets. TerraUSD (or UST) was an algorithmic stabilcoin designed to maintain a dollar peg using an arbitrage mechanism linked to Luna. Confidence evaporated almost immediately when UST lost its peg in 2022. Under pressure, the algorithm crashed. This triggered a downward spiral which sent both tokens to near zero values within days. A total of $40 billion was lost in the market, causing a massive chain reaction which affected lenders, hedge fund managers, and exchanges throughout the industry.
It spread very quickly. The firms that had relied upon UST and Luna liquidity for collateral as well as a reliable source of income were in distress. Three Arrows Capital, one of the first high-profile victims, was forced into distress. Even more failed as leverage unraveled and trust crumbled.
Snyder claims that Jump entered a secret agreement to help UST peg before its collapse and then made a profit once it fell apart. Jump was also under scrutiny by regulators, as the SEC stated in court documents that it earned approximately $1 billion through 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 Menedoza, a senior promoter at the collapsed crypto platform IcomTech was sentenced to almost six years in federal prison for his role in a multimillion-dollar Ponzi scheme that preyed on working class and Spanish-speaking investors across the United States.
An announcement by the US Attorney’s Office
The prosecution said Mendoza was a key player in the promotion of IcomTech. This purported mining and trading cryptocurrency company launched mid-2018, but collapsed at the end 2019. Platforms offered daily guarantees and promoted themselves as a way to achieve financial independence through cryptocurrency. Authorities said that IcomTech was a multi-level Ponzi scheme, which used money collected from new investors in order to pay previous participants, while the senior promoters took large amounts for their own use.
Mendoza, according to court documents, was one of IcomTech’s senior marketers and had close relationships with David Carmona, the founder of the company. Mendoza hosted recruiting events in his restaurant near Los Angeles, where attendees were convinced of the supposed profits the platform would bring.
To project a successful image, promoters also hosted flashy expos across the nation. They arrived in designer clothes and luxury cars to give an impression of their success. The online dashboards displayed increasing balances for investors, but many discovered later that they couldn’t withdraw the funds.
In August 2018, investors began complaining about the delays they faced when trying to withdraw their money. IcomTech responded by introducing a proprietary coin called “Icoms” which the promoters said would be eventually used to pay out. It was a waste of money and exacerbated the losses suffered by victims, who had already invested their hard-earned savings in this scheme. IcomTech offered investors up to 100% returns every six weeks between 2018 and 2019.
Mendoza, in addition to the prison term, was also ordered to pay nearly $790,000. He was also required to forfeit $1.5 Million, as well as his Downey home, California. Authorities claimed that proceeds of fraud were used to purchase it. Mendoza was also sentenced for his illegal entry into the United States following deportation. The prosecution said that Mendoza was deported four times. He also claimed to have entered the United States under false identities.
This site is for entertainment only. Click here to read more
