Jump Crypto Unit Settles With SEC for $123 Million Over TerraUSD Misconduct

Jump Crypto’s wholly-owned subsidiary, Tai Mo Shan, has agreed to a $123 million settlement with the US Securities and Exchange Commission (SEC) for its role in misleading investors about the stability of the TerraUSD (UST) stablecoin.

Jump Crypto, a subsidiary of the Chicago-based proprietary trading firm Jump Trading, was integral to Terra’s ecosystem. The firm is currently under investigation by the US Commodity Futures Trading Commission (CFTC).

Tai Mo Shan Settles With SEC for Misleading TerraUSD Claims

On December 20, the SEC highlighted Tai Mo Shan’s deceptive practices during the UST depegging crisis. The firm attempted to stabilize UST by purchasing over $20 million of the stablecoin.

SEC claimed that this falsely signaled to the market that Terra algorithmic mechanisms were effectively maintaining its value. However, this action failed to prevent the widespread disruption and significant investor losses triggered by the depegging event.

Furthermore, the SEC charged Tai Mo Shan with acting as a statutory underwriter for Terra Luna token. The agency asserted that the firm managed these assets as securities through unregistered transactions. Their strategy involved planning the distribution of these tokens on US-based trading platforms from January 2021 to May 2022.

SEC Chair Gary Gensler emphasized the broader impact of the incident, stating:

“[The impact of UST deppging] reverberated throughout the crypto markets, eventually costing the savings of countless investors. Regardless of the labels, crypto market participants should comply with the securities laws where applicable and not deceive the public. Otherwise, investors get hurt.”

Tai Mo Shan will pay $73,452,756 in disgorgement, $12,916,153 in prejudgment interest, and a $36,726,378 civil penalty as part of the settlement. The firm did not admit to or deny the SEC’s findings but agreed to a cease-and-desist order to prevent future violations of registration and fraud provisions.

This settlement comes shortly after Terraform and its founder Do Kwon were found liable for fraud and unregistered securities offerings. They agreed to a substantial $4.5 billion payment to compensate affected investors.

In January 2024, Terraform Labs declared bankruptcy. Following this, the company transferred control of the Terra blockchain to the community and discontinued a number of its products and services.