In short
- A brand new lawsuit launched by the directors for Terraform Labs’ chapter seeks $4 billion in damages from Leap Buying and selling for its alleged involvement within the Terra ecosystem’s collapse.
- Terraform Labs is searching for to carry Leap Buying and selling accountable for alleged market manipulation, self-dealing, and misuses of belongings.
- The corporate’s former CEO, Do Kwon, was sentenced to fifteen years in jail this month.
Todd Snyder, the court-appointed plan administrator overseeing the wind-down of Terraform Labs, has sued Leap Buying and selling in U.S. federal court docket, accusing the buying and selling agency of unlawfully profiting off of and materially contributing to the collapse of the Terra ecosystem.
The criticism was filed Thursday within the Northern District of Illinois, and seeks $4 billion in damages from Leap Buying and selling, its co-founder William DiSomma, and former Leap Crypto president Kanav Kariya.
Snyder alleges that Leap entered right into a collection of undisclosed agreements with Terraform that allowed the agency to extract billions of {dollars} in worth whereas serving to conceal structural weaknesses in TerraUSD, the algorithmic stablecoin on the middle of the collapse.
Terraform Labs confirmed the lawsuit on Friday, including that it sought to “maintain Leap to account for enriching itself by means of illicit market manipulation, self-dealing, and misuse of belongings,” in addition to to “get well worth for collectors and maintain Leap chargeable for exploiting the ecosystem, leaving unsuspecting traders to bear the losses.”
The Workplace of the Terraform Labs Plan Administrator has filed a $4B lawsuit in opposition to Leap Buying and selling over its direct function within the collapse of Terraform Labs, searching for to carry Leap to account for enriching itself by means of illicit market manipulation, self-dealing, and misuse of belongings.…
— Terra 🌍 Powered by LUNA 🌕 (@terra_money) December 19, 2025
The Wall Avenue Journal was first to report on the matter. A duplicate of the lawsuit has not but surfaced in public repositories at press time.
Decrypt has reached out to Terraform Labs and Leap Buying and selling for remark and can replace this text ought to they reply.
Fallout and contagion
Terraform Labs’ implosion started in Might 2022 after TerraUSD misplaced its greenback peg, spiraling right into a catastrophic market wipeout that led to losses of over $40 billion throughout TerraUSD and its sister token, LUNA.
The fallout unfold shortly by means of the crypto business, contributing to a wave of insolvencies that later culminated within the collapse of crypto change FTX. Terraform Labs filed for chapter in January 2024 and later agreed to pay roughly $4.5 billion to settle a civil securities fraud case with the Securities and Trade Fee.
Based on the lawsuit, as cited within the WSJ report, Leap and Terraform started working collectively as early as 2019 underneath preparations that gave Leap the choice to buy giant quantities of LUNA at costs beneath market worth.
The criticism additionally alleges that Leap later struck a “gents’s settlement” to help TerraUSD’s peg, together with by buying tens of hundreds of thousands of tokens throughout a Might 2021 depeg.
Terraform and Leap allegedly instructed the general public that the restoration demonstrated the success of TerraUSD’s algorithmic design, though Leap’s buying and selling exercise was chargeable for restoring the peg.
The go well with claims that after this episode, Leap negotiated adjustments to its contracts with Terraform that eliminated vesting restrictions, permitting the agency to obtain and promote LUNA tokens extra shortly.
Snyder additional alleges that Leap finally earned billions of {dollars} from promoting discounted LUNA into the market.
Do Kwon, the co-founder and former chief government of Terraform Labs, designed and promoted the algorithmic mannequin meant to maintain TerraUSD pegged to the greenback by means of its linkage with LUNA.
Earlier this month, he was sentenced within the U.S. to fifteen years in jail, and will but face a separate felony trial in South Korea.
