Fracture Labs, a game developer, has filed a lawsuit accusing Chicago-based trading firm Jump Trading of executing a pump-and-dump scheme involving its DIO token, the native cryptocurrency for the web3 game Decimated.
In a filing dated October 15, Fracture Labs claims that Jump Trading misused its role as a market maker to artificially inflate the value of the DIO token before profiting from a significant sell-off. According to the complaint, the two companies entered into an agreement in 2021 that allowed Jump to act as a market maker for the initial offering of DIO on Huobi (now HTX). As part of the deal, Fracture Labs lent Jump 10 million DIO tokens, valued at approximately $500,000 at the time, and transferred an additional 6 million tokens worth about $300,000 to HTX.
After DIO’s launch, the lawsuit alleges that HTX enlisted influencers to promote the token, driving its price up to $0.98. This surge inflated the value of the borrowed tokens to $9.8 million. However, the lawsuit claims that Jump then sold off all its tokens, causing the price to plummet to just $0.005. Following this drop, Jump allegedly repurchased the tokens for only $53,000 and returned them to Fracture Labs, effectively terminating their agreement.
Fracture Labs argues that this action severely damaged the token’s value, making it difficult to attract investors. The lawsuit also contends that Jump Trading breached their agreement by failing to stabilize DIO’s price as promised. The developer had assured HTX that they would not manipulate the market during the first 180 days of trading, transferring 1.5 million USDT into a holdings account as a guarantee. After the price collapse, HTX reportedly refused to refund most of that deposit.
The lawsuit accuses Jump Trading of fraud, conspiracy, and breach of contract, seeking a jury trial, damages, and the return of any profits allegedly made from the scheme.
Legal Troubles for Jump Trading
This is not the first instance of legal scrutiny for Jump Trading. Last year, the firm was implicated in a class-action lawsuit regarding alleged manipulation of Terraform Lab’s stablecoin, TerraUSD (UST). Additionally, the U.S. Commodity Futures Trading Commission recently launched an investigation into the firm’s investment activities, leading to the resignation of the firm’s former president, Kanav Kariya, shortly thereafter.
