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 a filing filed on October 15, Fracture Labs accused Jump Trading of abusing its role as a market maker to artificially inflate the value of the DIO token, the native cryptocurrency of the web3 game Decimated, and generate millions in profits.

According to the complaint, the two companies signed a deal in 2021 under which Jump would act as a market maker for DIO’s initial offering on Huobi, now known as HTX. As part of the deal, Fracture Labs loaned Jump 10 million DIO tokens, worth about $500,000 at the time, and sent HTX another 6 million tokens worth $300,000.

Fracture Labs also adds that after DIO launched, HTX recruited influencers to raise the token, which increased its price to $0.98, which in turn increased the value of the borrowed tokens to $9.8 million.

However, according to the lawsuit, Jump sold all of its tokens, causing the price to drop to just $0.005. Jump allegedly bought back the tokens after the drop for just $53,000 and returned them to Fracture Labs, effectively ending the deal.

Fracture Labs argues that this move reduces the value of the token and makes it difficult for the game developer to attract investors.

The lawsuit also alleges that Jump Trading breached the agreement by not keeping DIO’s price within the limits Fracture Labs agreed to with HTX. Jump promised to help keep the price of the token stable, but it did not keep its promise.

As part of the agreement with HTX, Fracture Labs transferred 1.5 million USDT to a holding account as a guarantee that they would not manipulate the market during the first 180 days of trading. However, after the price drop, HTX refused to refund most of this deposit.

The lawsuit therefore accuses Jump Trading of fraud, conspiracy, and breach of contract, and seeks a jury trial, damages, and the return of profits Jump allegedly made from the scheme.

legal issues

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

More recently, the U.S. Commodity Futures Trading Commission opened an investigation into the firm’s investment activities. A few days later, the firm’s former president, Kanav Kariya, resigned.