The ongoing trial involving Terraform Labs, the company behind the algorithmic stablecoin UST USTC/USD, took a dramatic turn on Monday with the testimony of James Hunsaker, a former employee of Jump Trading.
According to a series of social media posts by journalist Alexander Osipovich, Hunsaker’s testimony centered around his claim that Jump Trading colluded with Terraform Labs to manipulate the price of UST.
He revealed filing a whistleblower complaint with the SEC against his former employer, detailing their alleged role in propping up UST before its spectacular collapse in May 2022, which resulted in billions of dollars in losses for investors.
Hunsaker described a close relationship between Jump Crypto, a major high-frequency trading firm with a cryptocurrency arm, Jump Crypto, and Terraform Labs. He testified to a “critical deal” aimed at boosting UST adoption.
When UST’s peg to the U.S. dollar faltered in May 2021, Hunsaker recounted a Zoom call where Jump Crypto president Kanav Kariya allegedly assured colleagues that Terraform Labs founder Do Kwon “would vest us” after Jump’s intervention restored the peg.
Aggressive Trading And Hidden Hands
Hunsaker further alleged that following Kariya’s message, Bill DiSomma, whom he characterized as the true leader of Jump Crypto, directed aggressive trading to accumulate UST.
This move, according to Hunsaker, demonstrated Jump’s willingness to risk significant sums to support Terraform Labs, a “big important project” for the firm.
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Profitability And Concealment
The SEC’s case hinges on the argument that Terraform Labs and Do Kwon fraudulently concealed Jump Trading’s role in stabilizing UST in May 2021.
Hunsaker’s testimony aligns with this narrative, suggesting Kwon misled investors by claiming UST’s “automatic self-healing” mechanism was responsible for the peg’s restoration.
The SEC further alleges that Jump profited handsomely from its dealings with Terraform Labs, reportedly making around $1 billion.
Hunsaker left Jump Crypto in February 2022.
He described his attempts to share his concerns about UST’s stability through online platforms before filing his official whistleblower complaint with the SEC in August 2022.
Hunsaker’s stated motivation for coming forward is “to make sure there is some sort of justice and restitution” for the victims of the UST collapse.
What’s Next: The Benzinga’s Future of Digital Assets event, scheduled for Nov. 19, promises to be a crucial platform to explore the ongoing legal battle and its wider implications for the future of stablecoins and algorithmic models within the cryptocurrency space.
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