Fracture Labs accuses Jump trading of market manipulation in new lawsuit

A lawsuit filed by game developer Fracture Labs accuses Chicago-based trading giant Jump Trading of running a pump-and-dump scheme.

According to an Oct. 15 filing, Fracture Labs has accused Jump Trading of misusing its role as a market maker to artificially inflate the value of its DIO token, the native cryptocurrency for the web3 game Decimated, before offloading it for millions in profit.

Per the complaint, the two companies entered into an agreement in 2021 in which Jump would act as a market maker for the initial offering of DIO on Huobi, now known as HTX. As part of the deal, Fracture Labs lent Jump 10 million DIO tokens, worth around $500,000 at the time, and sent another 6 million tokens, valued at $300,000, to HTX.

Fracture Labs further adds that after DIO launched, HTX brought in influencers to hype up the token, which pushed its price up to $0.98, and in turn, inflated the value of the borrowed tokens to $9.8 million.

But then, according to the lawsuit, Jump dumped all its tokens, causing the price to crash down to just $0.005. After the plunge, Jump allegedly bought back the tokens for only $53,000 and returned them to Fracture Labs, effectively ending the agreement.

Fracture Labs argues that this move tanked the token’s value, making it hard for the game developer to reel in investors. 

The suit also claims that Jump Trading breached the agreement by failing to maintain DIO’s price within the limits that Fracture Labs had agreed to with HTX. Jump had promised to help keep the token’s price stable, but it didn’t follow through.

As part of the agreement with HTX, Fracture Labs transferred 1.5 million USDT into a holdings account as a guarantee that they wouldn’t manipulate the market during the first 180 days of trading. But after the price drop, HTX refused to refund most of that deposit.

As such, the lawsuit accuses Jump Trading of fraud, conspiracy, and breach of contract and is seeking a jury trial, damages, and the return of any profits Jump allegedly made from the scheme.

Legal troubles

This isn’t the first time Jump Trading has come under legal scrutiny. Last year, the market maker was implicated in a class-action lawsuit involving the alleged manipulation of Terraform Lab’s stablecoin TerraUSD (UST). 

More recently, The U.S. Commodity Futures Trading Commission launched an investigation into the firm’s investing activities. Just days later, the firm’s former president Kanav Kariya resigned.