On Wednesday, video game developer FractureLabs filed a lawsuit against crypto market maker Jump Trading. The lawsuit, reported by Bloomberg, accuses Jump of “fraud and deceit” in reference to the manipulation of the value of the DIO token, which is an integral a part of FractureLabs’ online game Decimated.
DIO Token Surge And Collapse
The grievance details that in 2021, FractureLabs intended to boost funds through an initial offering of the DIO token on the Huobi exchange, which has since been renamed HTX. As a part of this project, FractureLabs engaged Jump Trading as a market maker for the DIO token.
The arrangement involved the loan of 10 million DIO tokens to a subsidiary of Jump, alongside a separate transaction where FractureLabs sent 6 million DIO tokens to Huobi on the market through the offering.
Because the initial offering unfolded, Huobi reportedly enlisted online influencers to advertise the DIO token, causing its price to surge to a peak of $0.98 on the time. This spike significantly increased the worth of the tokens borrowed by Jump, bringing their price to $9.8 million.
Nevertheless, the situation took a pointy turn when, in accordance with the lawsuit, Jump began to “systematically” liquidate its holdings of the DIO token.
This selling pressure led to a drastic decline within the token’s price, which plummeted to around $0.005, allowing Jump to repurchase the tokens at a fraction of their earlier value—roughly $53,000—before returning them to FractureLabs and terminating its market-making agreement.
Jump Trading Accused Of ‘Pump And Dump’ Scheme
FractureLabs’ lawsuit also alleges that Jump Trading concealed its intentions to make use of the initial public offering of DIO as a possibility for a “pump and dump” scheme, in alleged collusion with the HTX exchange.
Jump had allegedly assured FractureLabs that it might maintain the value of the DIO token inside certain parameters required by Huobi for the listing.
Yet, the video game developer claims that Jump Trading’s actions caused the token’s price to fall outside of those agreed parameters, leading to HTX refusing to refund a good portion of a $1.5 million deposit made by FractureLabs in Tether’s USDT stablecoin.
In response to inquiries, HTX stated, “As this matter is now subject to ongoing litigation, and HTX just isn’t named as a defendant, we’re unable to comment further right now.”
On the time of writing, the DIO token was trading at $0.014, representing a 171% price increase year-to-date.
Featured image from DALL-E, chart from TradingView.com