Jump Trading, a market maker, is facing a lawsuit from FractureLabs, the developer of the online game “Decimated.” The lawsuit accuses Jump Trading of engaging in a pump-and-dump scheme with the game’s native token, DIO, which is traded on crypto markets.
FractureLabs alleges that Jump Trading manipulated the market by dumping the DIO token and then buying it back at a lower price, profiting from the efforts of FractureLabs to raise funds through an initial offering of DIO on HTX (formerly Huobi) in 2021. Jump Trading, under an agreement with FractureLabs, borrowed 10 million DIO tokens and sent 6 million tokens to HTX for the sale. However, after the token’s price surged to $0.98, Jump Trading allegedly sold off its holdings, causing the price of DIO to plummet to less than half a cent. Jump Trading then repurchased the tokens at a much lower price, returned them to FractureLabs, and terminated the market-making contract.
FractureLabs claims that Jump Trading misrepresented its intentions and violated an agreement to maintain the token’s price within a specific range under Huobi’s listing conditions. As a result, HTX withheld a significant portion of a $1.5 million Tether (USDT) deposit made by FractureLabs, leading to arbitration between the two parties. While HTX has refrained from commenting on the ongoing litigation, it has stressed its commitment to operating within legal frameworks.
This is not the first time Jump Trading has been embroiled in controversy. In a lawsuit filed by the US Securities and Exchange Commission (SEC) against Terraform Labs in February 2023, Jump Trading was implicated in the downfall of the UST stablecoin, USTC, although it was not named as a defendant in the case. The SEC alleged that Jump Trading played a significant role in helping Terraform Labs restore the peg of UST to the US dollar after it lost parity in May 2021.
Furthermore, in June, the US Commodity Futures Trading Commission (CFTC) reportedly initiated an investigation into Jump Trading’s activities in the crypto market. However, it is important to note that this probe does not suggest any wrongdoing on the part of the market maker.
As the legal battle between FractureLabs and Jump Trading unfolds, the crypto community will be closely watching the outcome and its implications for market manipulation and regulatory compliance in the industry.