According to a report by Bloomberg, game developer Fracture Labs has sued Jump Trading, accusing the company of using its DIO game token to operate a "pump and dump" scheme.
Fracture Labs claims in a lawsuit filed on October 15 in the Illinois District Court that in 2021 it reached an agreement with Jump to act as a market maker to assist in the initial issuance of its DIO token on the cryptocurrency exchange Huobi (now known as HTX).
As part of the agreement, the game developer claims it lent Jump 10 million DIO, worth about $500,000, and additionally sent 6 million tokens valued at $300,000 to the HTX exchange. After HTX invited online KOLs to promote the DIO token following its launch, the token's price subsequently soared to a high of $0.98, causing the value of the lent tokens to reach $9.8 million.
However, Fracture Labs alleges that Jump subsequently sold all the tokens it held, and this "massive sell-off" caused the price to drop to $0.005, resulting in the trading company profiting millions of dollars.
The company accuses Jump of later repurchasing the tokens at a lower price, worth only $53,000 at the time, and then returning them to Fracture Labs, thereby terminating the agreement. The lawsuit states:
"The fraudulent scheme by defendant Jump caused a severe devaluation of DIO, making it more difficult for Fracture Labs to attract investors and market interest."
Fracture Labs claims that another part of the agreement with HTX required the company to transfer 1.5 million USDT into HTX's holding account, as a guarantee that the game developer would not manipulate "the market for DIO tokens" within the first 180 days of the transaction. Jump is also alleged to have promised Fracture Labs that it would keep the price of DIO within certain parameters required by HTX. However, ultimately due to Jump's breach of promise leading to price fluctuations, HTX refused to return most of Fracture Labs' collateral. (HTX was not named as a defendant in this lawsuit.)
Fracture Labs accuses Jump Trading of fraud and deception, conspiracy to commit fraud, breach of contract, and breach of fiduciary duty. The company seeks a jury trial, damages, and the return of unjust enrichment.