The U.S. Securities and Exchange Commission (SEC) hit Jump Trading with a substantial fine for its involvement in supporting the TerraUSD stablecoin during its collapse. This incident has renewed debates on market manipulation and risks within the crypto industry.
Jump Trading's Role in TerraUSD Recovery
In May 2021, after the TerraUSD (UST) stablecoin lost its peg to the U.S. dollar, it appeared to recover. However, Jump Trading's subsidiary, Tai Mo Shan, reportedly intervened by purchasing $20 million worth of UST to restore the peg. According to an SEC complaint, these actions misled investors about UST's stability and its related token, Luna.
Settlement and Consequences for Tai Mo Shan
The SEC and Tai Mo Shan reached a settlement requiring it to pay $123 million, including over $86 million in disgorgement and $36 million as a civil penalty. The SEC alleges that Tai Mo Shan's actions misled investors into believing Terraform Labs' arbitrage mechanism was effective. Previously, the SEC accused Tai Mo Shan of profiting $1.28 billion from these transactions, but the final settlement focused on the $123 million penalty.
Terraform Labs and SEC's Reaction
Terraform Labs, whose founder Do Kwon had previously praised TerraUSD's recovery, agreed to pay over $4 billion in various fines following its ecosystem's collapse. Jump Crypto's president, Kanav Kariya, invoked the Fifth Amendment during a previous deposition on the deal. The company agreed to the penalty without admitting or denying the SEC's findings.
This case reiterated the importance of transparency and accountability in the cryptocurrency sector. The SEC's actions continue to highlight that any form of manipulation or withholding of information damages market trust and leads to severe consequences for involved parties.