Crypto Game Developer Sues Jump Trading for Alleged “Pump and Dump” Scheme
On Tuesday, October 15, 2024, crypto game developer Fracture Labs filed a lawsuit in a federal district court in Illinois against Jump Trading LLC, alleging involvement in a “pump and dump” scheme that allegedly resulted in eight-figure profits for the trading firm. The complaint asserts that Jump Trading facilitated an initial exchange offering (IEO) for Fracture Labs’ cryptocurrency, the DIO token, but misled the company to carry out fraudulent activities.
Fracture Labs, based in Estonia, claims that Jump Trading not only breached its fiduciary duties but also engaged in fraud and deceit, leading to significant financial harm for the game developer. The lawsuit centers on the development of “Decimated,” an online role-playing game that incorporates the DIO token for in-game transactions. Players can earn and utilize these tokens within the game, and they can also be purchased and traded externally like other cryptocurrencies.
In late 2021, Fracture Labs sought to raise capital through an initial exchange offering of the DIO token, a fundraising approach introduced in 2019 that streamlines the process through centralized exchanges. Jump Trading offered to assist in this endeavor by providing consultation services, facilitating the offering, and serving as the market maker for the token.
However, the complaint alleges that Jump’s involvement was a façade designed to deceive Fracture Labs into signing two critical agreements. The first agreement involved Fracture Labs lending 10 million DIO tokens, valued at approximately $500,000, to a subsidiary of Jump. The second agreement mandated that Fracture Labs transfer 6 million tokens, valued at around $300,000, to the crypto exchange Huobi, now rebranded as HTX.
Under the terms advised by Jump, Fracture Labs also deposited about $1.5 million with HTX, which was contingent upon the token’s price remaining within specified parameters for the first 180 days of trading. The lawsuit claims that once these agreements were executed, Jump and HTX executed a coordinated “pump and dump” scheme.
According to the allegations, HTX promoted the DIO token through online influencers, leading to a peak price of $0.98. At this point, Jump Trading allegedly sold the 10 million tokens it had borrowed, securing nearly $10 million in profits. Following this price surge, the token’s value dramatically fell to $0.0053, allowing Jump to repurchase the tokens for just $53,000 before returning them to Fracture Labs.
Subsequently, Jump Trading terminated its role as the market maker for Fracture Labs. Meanwhile, HTX contended that the token’s price fluctuations exceeded the parameters established by Jump, leading the exchange to withhold a significant portion of the initial deposit from Fracture Labs.
In its complaint, Fracture Labs asserts that Jump’s actions severely devalued the DIO token, negatively impacting the company’s overall valuation and hindering its ability to attract new investors.
The case is currently pending before U.S. District Judge Jeffrey Cummings in the Northern District of Illinois, as the legal battle unfolds over allegations of fraud and misconduct in the burgeoning field of cryptocurrency trading and investment.
Please contact BlockTribune for access to a copy of this filing.
