Tai Mo Shan Ltd., a subsidiary of Jump Trading's cryptocurrency division, agreed to pay $123 million to settle allegations from the U.S. regulatory agency SEC regarding misleading investors about the stability of the TerraUSD algorithmic stablecoin.
Attempting to stabilize the UST coin price, misleading investors
The U.S. Securities and Exchange Commission (SEC) stated in a press release last Friday that Tai Mo Shan Ltd. misled investors regarding the stability of the so-called 'algorithmic stablecoin' Terra USD (UST) issued by Terraform Labs PTE Ltd. (Terraform), and further accused Tai Mo Shan of acting as a statutory underwriter in unregistered transactions involving the issuance and sale of securities related to LUNA (a cryptocurrency asset issued by Terraform).
Terraform and its founder Do Kwon were found liable for fraud and unregistered securities issuance by a federal district court in April 2024, agreeing to pay $4.5 billion to affected investors. The SEC found that when UST devalued from its peg of $1 in May 2021, Tai Mo Shan and Terraform entered into an agreement that incentivized Tai Mo Shan to purchase UST in exchange for Terraform 'allocating' existing options for Tai Mo Shan to purchase LUNA. On that day and in the following days, Tai Mo Shan attempted to restore UST to its $1 peg, which included purchasing over $20 million worth of UST. Given that Terraform previously stated its algorithmic mechanism would maintain UST's peg to $1, Tai Mo Shan traded UST in a negligent manner, deceiving the market into believing in Terraform's algorithmic mechanism, while in reality, Tai Mo Shan was purchasing UST in large quantities under Terraform's incentive, thereby stabilizing the situation to some extent.
The SEC also found that at least from January 2021 to May 2022, Tai Mo Shan acted as a statutory underwriter for LUNA, acquiring certain LUNA crypto assets from Terraform with the intention of offering and reselling LUNA as securities on U.S. cryptocurrency exchanges shortly after acquiring LUNA from Terraform.
Settled with the SEC for $123 million
SEC Chairman Gary Gensler stated:
This case serves as a reminder that we have seen significant losses suffered by investors due to fraud in the cryptocurrency market multiple times. Participants in the cryptocurrency market should comply with applicable securities laws and not deceive the public. Otherwise, investors will be harmed.
As part of the settlement agreement, Tai Mo Shan agreed to pay $73,452,756 in illicit gains, $12,916,153 in pre-judgment interest, and $36,726,378 in civil penalties, totaling approximately $123 million.
This article about Jump Trading subsidiary misleading investors due to the UST incident, settling with the SEC for $123 million first appeared in Chain News ABMedia.
