Jump Trading faces allegations of token price manipulation in FractureLabs lawsuit

FractureLabs, a video game developer, has filed a lawsuit against Jump Trading, a major cryptocurrency market maker. The firm is accused of using its DIO gaming token to operate a market manipulation. FractureLabs alleged that in 2021, it entered an agreement with Jump as a market maker to assist with an initial offering of its DIO token on the crypto exchange Huobi, now HTX.

FractureLabs accuses Jump Trading of DIO price manipulation 

FractureLabs asserts that after hiring Jump to manage the market for the DIO token, it transferred 16 million DIO tokensᅳ10 million to Jump, and an additional 6 million to HTX (formerly Huobi). Following a promotional campaign by influencers, the token’s price surged to $0.98, giving Jump’s holdings a value of $9.8 million. 

According to the lawsuit, Jump then sold off its tokens at this inflated price, after which the DIO token crashed to less than half a cent. FractureLabs alleges that Jump intentionally caused this market downturn by repurchasing the token at a discounted rate and violating its commitment to serve as the market facilitator.

They further assert that Jump failed to uphold their responsibility to uphold the token’s value and exited the agreement shortly after the downturn occurred. The lawsuit further alleges that HTX withheld $1.5 million in Tether, which FractureLabs had deposited, due to the token price collapse. 

“Jump’s dump of the DIO tokens caused the price to swing outside of the parameters that Jump had recommended for the token and that FractureLabs had agreed to in its listing agreement with HTX.”

~FractureLabs

FractureLabs accused Jump Trading of fraud and deceit, civil conspiracy to commit fraud, breach of contract, and breach of fiduciary duty. It’s requesting a jury trial, damages, and disgorgement of profits.

Jump Trading has denied FractureLabs’ allegations, calling them “factually flawed” and promising to contest the claims in court.

Jump Trading’s history of controversy has continued to deepen

This lawsuit is not the first time Jump Trading has been embroiled in controversy. In 2023, the U.S. Securities and Exchange Commission (SEC) referenced Jump’s involvement in the collapse of Terraform Labs’ UST stablecoin, though Jump was not a defendant in that case. The SEC claimed that Jump played a role in re-pegging the UST to the U.S. dollar after an initial de-pegging event in May 2021.

Jump Trading has recently transferred hundreds of millions of dollars worth of Ether. This aggressive unloading of assets stirred a debate. There were rumors that the trades might be part of a liquidation process, as the proprietary trading firm prepares to wind down its crypto operations, following its former CEO’s resignation, amid a probe by the U.S. Commodity Futures Trading Commission (CFTC). Still, the market maker did not respond to the allegations.