The Securities and Exchange Commission
The Securities and Exchange Commission (SEC) has charged Tai Mo Shan Limited, a subsidiary of Jump Crypto, with deceiving investors about TerraUSD (UST). The regulator alleges that Tai Mo Shan took part in trading activities meant to give the impression that UST’s advertised algorithm could sustain its price alone.
However, when UST lost its
However, when UST lost its peg in May 2021, Terraform Labs enlisted Tai Mo Shan’s help to buy more than $20 million worth of UST, suggesting that a technical mechanism kept the token’s $1 value even though Tai Mo Shan’s intervention was needed to restore it. The SEC states that Terra’s algorithmic approach did not independently maintain UST’s parity with the dollar, as claimed by Terraform, but instead depended on Tai Mo Shan’s purchases.
These transactions involved incentives allowing
These transactions involved incentives allowing Tai Mo Shan to acquire LUNA at a discounted rate once UST stabilized. The commission argues that these incentives undermined Terraform’s public claims by showing external support played a significant role in restoring the $1 price. As a result, Tai Mo Shan agreed to pay $123 million in disgorgement, prejudgment interest, and penalties.
However, the company neither admitted
However, the company neither admitted nor denied the findings but agreed to stop further violating registration and fraud provisions. The Terra Luna ecosystem has faced numerous issues following a 2022 collapse that exposed flaws in its stablecoin model and eroded market confidence. Terraform Labs, founded by Do Kwon, has faced legal challenges, including an SEC case finding Terraform and Kwon liable for fraud and unregistered securities offerings.
The company filed for bankruptcy in January 2024, reporting assets and liabilities estimated between $100 million and $500 million. Despite introducing a new token and chain, Terra’s efforts to regain trust have been hampered by ongoing controversies.
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