Jump Trading Accused of ‘Pump and Dump’ Scheme Targeting FractureLabs’ DIO Token

According to the suit, FractureLabs planned to raise funds through an initial offering of the DIO token on the Huobi exchange in 2021.

FractureLabs, a Web3 gaming company, filed a suit against Jump Trading on Tuesday (Oct 15) in the US Federal Court in Chicago, alleging that the trading firm engaged in a “pump and dump” scheme involving the DIO token.

According to the suit, FractureLabs planned to raise funds through an initial offering of the DIO token on the Huobi exchange in 2021. The company said it retained Jump as a market maker for DIO, a token used within its Decimated online game that also trades in the crypto market. It loaned 10 million of the tokens to a Jump subsidiary as part of the agreement, while separately sending six million DIO tokens to Huobi, now known as HTX, to sell in the offering.

The complaint alleges that Jump had told FractureLabs it would keep DIO’s price within certain parameters that Huobi required as part of its agreement to list the token on its exchange. However, Jump’s sale of DIO caused the token’s price to fall outside those parameters, and as a result, HTX refused to refund the majority of a deposit of US$1.5 million worth of Tether’s USDT stablecoin that FractureLabs had paid as part of the agreement.

“These allegations are factually flawed and completely baseless,” a spokesperson for Jump said in a statement. “Jump intends to vigorously defend itself.”

HTX wasn’t named as a defendant in this case.

“HTX is committed to operating in full compliance with all applicable laws and regulations,” the exchange said when asked for comment. “As this matter is now subject to ongoing litigation, and HTX is not named as a defendant, we are unable to comment further at this time.”

The case was filed on Tuesday in the US Federal Court in Chicago. FractureLabs also filed arbitration against Huobi in Singapore and globally “and they didn’t respond,” according to chief executive officer Stephen Arnold.

Jump, which is also a major trader in traditional markets, has a mixed history in crypto. At the end of June, Kanav Kariya, the head of Jump Trading’s crypto unit, said he is leaving the company. His exit followed a difficult two years in which Jump was at the centre of one of crypto’s largest collapses, the failed TerraUSD stablecoin project. It was among trading firms questioned by US prosecutors in a probe of the token’s 2022 collapse.