On Wednesday, video game developer FractureLabs filed a lawsuit against cryptocurrency market maker Jump Trading. The lawsuit, reported by Bloomberg, accuses Jump of “fraud and deception” in connection with manipulating the price of DIO tokens, which are an integral part of FractureLabs’ online game Decimated.
DIO token surge and collapse
The complaint details that in 2021, FractureLabs intended to raise funds through an initial offering of DIO tokens on the Huobi exchange, which was renamed HTX. As part of this project, FractureLabs has engaged Jump Trading as a market maker for the DIO token.
The deal included a loan of 10 million DIO tokens to a subsidiary of Jump, alongside a separate transaction in which FractureLabs sent 6 million DIO tokens to Huobi for sale during the offering period.
As the initial offering rolled out, Huobi reportedly commissioned online influencers to promote the DIO token, causing its price to soar to a then-high $0.98. This surge significantly increased the value of the tokens Jump borrowed, bringing their value to $9.8 million.
However, the situation suddenly changed when Jump began “systematically” liquidating its holdings in DIO tokens, according to the lawsuit.
This selling pressure caused the token’s price to drop significantly, plummeting to around $0.005, and Jump decided to sell it at a fraction of its previous value (around $53,000) before returning the token to FractureLabs and terminating the market-making agreement. I was able to buy it back.
Jump Trading Accused of ‘Pump and Dump’ Scheme
FractureLabs’ lawsuit also alleges that Jump Trading conspired with the HTX exchange to conceal its intent to use DIO’s initial public offering as an opportunity for a “pump-and-dump” scheme.
Jump allegedly assured FractureLabs that it would maintain the price of the DIO token within certain parameters required by Huobi for listing.
However, the video game developer said Jump Trading’s actions caused the token’s price to fall outside of these agreed upon parameters, and as a result, HTX lost the $1.5 million that FractureLabs had deposited in Tether’s USDT stablecoin. They claim that they refused to refund a significant amount of the money.
In response to inquiries, HTX said: “As this matter is the subject of ongoing litigation and HTX is not named as a defendant, we are unable to comment further at this time.”
The weekly chart shows DIO’s price collapse in February 2022 and subsequent sideways price action. Source: DIUSDT on TradingView.com
At the time of writing, the DIO token is trading at $0.014, representing a 171% price increase since the beginning of the year.
Featured image from DALL-E, chart from TradingView.com
