On Jump Trading on TerraUSD

The Securities and Exchange Commission has fined Tai Mo Shan Limited, a wholly owned subsidiary of Jump Crypto Holdings, $123 million for misleading investors about the stability of Terra USD, a purported “algorithmic stablecoin” issued by Terraform Labs PTE Ltd. (Terraform).

Tai Mo Chan is also accused of trading in securities in unregistered transactions. The SEC alleged that the company acted as a legal guarantor for certain of its offerings and sales of LUNA, which was also issued by Terraform and sold as collateral.

SEC Chairman Gary Gensler said:

“This case reminds us that we have often seen large investor losses due to fraud in the cryptocurrency markets.” ~ Gary Gensler

He stated that Tai Mo Shan's illegal activities have affected the entire cryptocurrency market, resulting in huge losses for investors. Gary stressed the need for market players to abide by security laws and avoid deceiving the public about investor security.

Tai Mo Shan agreed to settle the fine.

TerraUSD operated at a fixed value of $1 through a network of mixed algorithms and trader motivations involving LUNA. However, when the network was strained and appeared to be down, Tai Mo Shan made massive purchases that helped stabilize the coin. According to the SEC, the impression from Tai Mo’s purchase was that the algorithmic mechanism was working, however it was a deceptive tactic.

Tai Mo Shan agreed to pay $73,452,756 in restitution, $12,916,153 in pre-emption interest, and a civil penalty of $36,726,378 as part of the settlement. Without admitting or denying the SEC’s findings, Tai Mo Shan agreed to cease and desist from the registration and fraud provisions it violated.

According to court filings with the Securities and Exchange Commission, Jump Crypto entered into an arrangement with Terraform to back TerraUSD and made profits of up to $1 billion. Terraform later agreed to pay about $4.5 billion to settle a lawsuit filed by the SEC over its collapse. Terra’s collapse shook the cryptocurrency world, costing investors $40 billion in assets and equity.

The Luna Foundation created a group of people as its guardians, and among them was Kanav Karia, a Jump Crypto intern who became responsible for overseeing the TerraUSD reserve. The SEC case against Jump Trading began during the crypto winter and was eventually settled.