On Wednesday, September 2, 2026, the U.S. District Court for the Northern District of California issued an order allowing a securities class action lawsuit to proceed against crypto trading firm Jump Trading LLC and its subsidiaries. Investors allege that Jump Trading misled them and manipulated the market for Terraform Labs’ stablecoins, leading to the collapse of the Terraform ecosystem.
U.S. District Judge P. Casey Pitts ruled that the investors’ claims can move forward against Jump Trading, Jump Crypto Holdings, and Tai Mo Shan Ltd. However, the order dismissed several statements as inactionable and released Jump Crypto president Kanav Kariya and Jump Trading founder William DiSomma from certain claims.
The lawsuit, brought by investors Nick Patterson and Michael Tobias, accuses Jump and its entities of manipulating Terraform’s algorithmic stablecoin, UST. The investors claim that an agreement between Terraform and Jump led the trading firm to secretly support UST’s value in May 2021 when the token lost its peg to the U.S. dollar due to issues with Terraform’s algorithm. The suit further alleges that Jump continued to issue misleading statements about the Terraform ecosystem’s stability even after the depegging event.
The Terraform ecosystem experienced a complete collapse a year later, rendering its tokens nearly worthless and contributing to a broader downturn in the cryptocurrency market, often referred to as “crypto winter.” This collapse also triggered a wave of bankruptcies within the crypto industry. Terraform’s founder, Do Kwon, was previously sentenced to 15 years in December for his role in the fraud, which resulted in an estimated $40 billion in losses.
This marks the fifth attempt by Patterson and Tobias to bring their claims against Jump. Judge Pitts stated in his order that this would be the final opportunity for the investors to amend their claims. “After five bites, there is barely any apple left,” the order read, indicating that dismissed claims would be permanently barred.
In a previous order in January 2024, Judge Pitts had allowed the investors’ claims to proceed, determining that Terraform’s stablecoins qualified as investment contracts. However, at that time, the judge found that the investors had not adequately demonstrated how Jump’s October 2021 blog posts or public statements made by Kariya were misleading or false, characterizing them as nonactionable statements of opinion.
The 2024 order also denied Jump’s request to move the case to arbitration, a decision that was later upheld by the Ninth Circuit Court of Appeals, and a subsequent request to the U.S. Supreme Court to hear the matter was also declined.
Judge Pitts’ most recent order reaffirmed his stance that the Terraform stablecoins are securities. He rejected Jump’s arguments that the regulatory landscape for stablecoins had evolved since the 2024 ruling. The judge noted that while a nonbinding interpretation from the U.S. Securities and Exchange Commission suggests that stablecoins backed by assets in reserve may not be considered securities, the Terraform algorithmic stablecoin operated on a different mechanism not covered by the SEC’s interpretation. “The SEC’s interpretation by its own terms therefore does not apply to the stablecoin system at issue here,” the order stated.
The court found that investors can continue to pursue their market manipulation claims because they have “plausibly alleged that defendants did not believe that UST was worth what they paid.” Judge Pitts highlighted the investors’ allegation that Jump’s significant purchases occurred shortly after the depegging event, despite the absence of a functioning algorithm to support UST’s peg to the dollar, making the stablecoin virtually worthless without that peg.
However, Judge Pitts determined that certain statements made in Jump’s blog posts and podcasts did not provide sufficient grounds for securities fraud claims. The order pointed out that in some instances, Jump could not be held liable for quotes attributed to others within the posts, and in others, the investors failed to prove that Jump had a responsibility to disclose additional information it possessed regarding the instability of the Terraform ecosystem.
Despite these dismissals, investors can proceed with claims related to a blog post authored by Jump and Kariya several months after the depegging event, which praised Terraform’s “stability mechanism.” Additionally, a separate Jump blog post stating the firm’s belief that the Terraform ecosystem was the “most elegant solution for creating a highly scalable and more decentralized stablecoin” is also part of the ongoing claims.
The court concluded that while knowledge of the stablecoin’s depegging event did not automatically create a duty to disclose, Jump’s conflicting interests and subsequent realization of substantial profits “tips the analysis” towards establishing a duty for Jump to disclose its role in stabilizing the Terraform token. This duty, the order specified, particularly applies when making statements that emphasized the algorithm’s ability to maintain UST’s value without external intervention.
The blog post by Jump and Kariya that lauded Terraform’s stability “would lead a reasonable investor to assume that Jump was not in possession of any information that indicated that the algorithm had already failed once and may possibly fail again,” the order stated. Consequently, “Jump’s failure to discuss the prior depeg in the statement could reasonably mislead an investor in Terra and UST.”
The order also specified that DiSomma is released from claims stemming from these particular statements. However, both Kariya and DiSomma will still face claims that they individually held control over Jump’s alleged role in market manipulation.
Please contact BlockTribune for access to a copy of this filing.
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