Fracture Labs Sues Jump Trading Over Alleged ‘Pump and Dump’ Scheme

Crypto game developer Fracture Labs has filed a lawsuit against Jump Trading, alleging that the firm manipulated its DIO gaming token through a “pump and dump” scheme.

The suit, submitted on October 15 in an Illinois District Court, details Fracture Labs’ claim that Jump Trading, acting as a market maker, breached its agreement to support the DIO token’s initial offering on the crypto exchange HTX (formerly Huobi) in 2021.

Fracture Labs asserts that it provided Jump Trading with 10 million DIO tokens, valued at $500,000, to facilitate the token’s launch.

Additionally, 6 million DIO tokens, worth approximately $300,000, were transferred to HTX.

Jump Sells DIO Holdings At Peak Price

Following the launch, HTX engaged online influencers to promote DIO, driving its value up to $0.98.

At this peak, the tokens Jump held were reportedly valued at $9.8 million.

However, Fracture Labs claims that Jump then sold its entire DIO holdings, leading to a “mass liquidation” that saw the token’s price plummet to $0.005.

The lawsuit alleges that Jump profited millions from this maneuver, subsequently buying back the tokens at the reduced value of around $53,000.

The tokens were then returned to Fracture Labs, effectively ending the partnership.

According to the complaint, Jump’s actions severely devalued DIO, making it challenging for Fracture Labs to secure further investment and interest in its platform.

The developer alleges that this move was a breach of trust and a deliberate attempt to manipulate the market for profit.

In addition, Fracture Labs states it transferred 1.5 million USDT into an HTX holding account to assure that it would not interfere with DIO’s market performance within the first 180 days of trading.

Jump Trading had supposedly committed to maintaining DIO’s price within specific parameters set by HTX as part of the token listing agreement.

Despite these measures, the price fluctuation caused by Jump’s actions allegedly led HTX to withhold a significant portion of the USDT deposit.

Fracture Labs accuses Jump Trading of fraud, deceit, civil conspiracy, breach of contract, and breach of fiduciary duty.

The game developer seeks a jury trial, restitution, and disgorgement of profits gained through the alleged scheme.

Notably, HTX has not been named as a defendant in the case.

Jump Crypto President Steps Down Amid CFTC Probe

In June, Jump Crypto President Kanav Kariya announced that he was stepping down from his position at the Chicago-based company just days after news broke that the Commodity Futures Trading Commission (CFTC) launched a probe into the trading firm.

The CFTC probe on Jump Crypto primarily focuses on its trading and investments across the crypto sector.

Founded in 2015, Jump Crypto has experienced several setbacks in recent years, particularly as the U.S. government notched up its regulation-by-enforcement approach to the digital sector.

The firm came under scrutiny after it was revealed in 2023 that it had made $1.28 billion before the crash of Terraform Lab’s Terra Luna ecosystem, of which Jump Crypto had a market-making arrangement.