According to the lawsuit filed by Fracture Labs, in 2021 the company entered into an agreement with Jump Trading, according to which the market maker was to facilitate the initial offering of DIO tokens on the HTX (formerly Huobi) cryptocurrency exchange. As part of the agreement, the game developer lent Jump Trading 10 million DIO worth $500,000, while separately sending 6 million DIO worth $300,000 to the HTX exchange.
The plaintiff claims that after the launch of the token, HTX hired influencers to promote it. The DIO rate rose sharply to $0.98, and the borrowed tokens were valued at $9.8 million. Jump Trading sold all assets, and due to a “mass liquidation,” the token rate collapsed to $0.005, and the market maker received a multimillion-dollar profit. Jump Trading then repurchased about $53,000 worth of tokens at a lower price, returning them to Fracture Labs, and then terminated the agreement.
“As a result of the fraudulent scheme carried out by Jump Trading, DIO tokens were sharply devalued, making it difficult for FractureLabs to attract investors. Jump Trading violated the agreement by using DIO tokens for pumps and dumps,” the lawsuit states.
Additionally, as part of the agreement, Fracture Labs transferred 1.5 million USDT stablecoins to HTX’s account as a guarantee that the game developer would not manipulate the DIO rate during the first 180 days of trading. Jump Trading promised to keep the DIO rate within the recommended parameters in order to comply with HTX’s requirements for listing tokens on the exchange. However, due to the volatility of the tokens, HTX refused to return most of Fracture Labs’ deposit of 1.5 million USDT, the plaintiff claims.
Fracture Labs accused Jump Trading of fraud and deception, as well as breach of contract and fiduciary duty. The developer demanded compensation for damages and the return of illegally obtained profits. The HTX exchange is not named as a defendant in the case.
In June, the US Commodity Futures Trading Commission (CFTC) began investigating Jump Crypto, and last year the market maker left the US market due to regulatory pressure.
Source: Bits
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