FractureLabs, the game developer behind the popular online game “Decimated,” has recently made headlines for filing a lawsuit against Jump Trading. The lawsuit, as reported by Bloomberg News on Oct. 16, accuses Jump Trading of engaging in market manipulation tactics related to the game’s native token, DIO, which is traded on various cryptocurrency markets.
The complaint alleges that Jump Trading orchestrated a “pump and dump” scheme with the DIO token, causing its price to fluctuate dramatically. According to the filing, FractureLabs had planned to raise funds through an initial offering of DIO on HTX (formerly known as Huobi) and had hired Jump Trading as a market maker in 2021. As part of their agreement, FractureLabs loaned 10 million DIO tokens to Jump Trading’s subsidiary and sent 6 million tokens to HTX for the sale.
However, things took a turn for the worse when the price of the DIO token soared to $0.98, only to crash to less than half a cent shortly after. Jump Trading allegedly seized this opportunity to liquidate its holdings, repurchase the tokens at a significantly reduced price, and then cancel its market-making contract with FractureLabs. This move not only violated the agreement between the two parties but also caused FractureLabs to lose a substantial amount of money.
FractureLabs claims that Jump Trading misrepresented its intentions and failed to uphold their agreement to maintain the token’s price within a specified range as per Huobi’s listing conditions. As a result, HTX withheld a portion of a $1.5 million Tether (USDT) deposit made by FractureLabs, leading the game developer to seek restitution through arbitration.
While HTX has refrained from commenting on the matter due to the ongoing litigation, the platform has emphasized its commitment to operating within legal frameworks and maintaining integrity in its operations.
This lawsuit is not the first time Jump Trading has been embroiled in controversy. In a separate case involving the US Securities and Exchange Commission (SEC) and Terraform Labs in February 2023, Jump Trading was mentioned as playing a significant role in the downfall of the UST stablecoin, USTC. Despite not being a defendant in the case, the SEC alleged that Jump Trading assisted Terraform Labs in reestablishing the peg of UST to the US dollar after it lost parity in May 2021.
In June, the US Commodity Futures Trading Commission (CFTC) reportedly initiated an investigation into Jump Trading’s activities in the crypto market. However, it is essential to note that this probe does not imply any wrongdoing on the part of the market maker.
As the legal battle between FractureLabs and Jump Trading unfolds, the cryptocurrency community is closely watching to see how the outcome of this lawsuit may impact market integrity and participant trust in the crypto space. It serves as a reminder of the importance of transparency, accountability, and adherence to regulatory standards in the ever-evolving world of digital assets.