Jump Trading Subsidiary Agrees to $123 Million Settlement With SEC
In May 2021, the TerraUSD stablecoin, an algorithmic token, experienced a "depeg" event, briefly falling below its $1 value.
While it appeared to recover automatically, behind the scenes, Jump Trading’s subsidiary, Tai Mo Shan, intervened by purchasing $20 million worth of the token, helping to restore its peg. However, this action, which allegedly misled investors about the token’s stability mechanism, prompted the U.S. Securities and Exchange Commission (SEC) to file a complaint against Tai Mo Shan.
The SEC and Tai Mo Shan reached a settlement in which the latter agreed to pay approximately $123 million in fines. This includes over $86 million in disgorgement, reflecting the profits Tai Mo Shan made from the purchases, along with a $36 million civil penalty. The SEC claims Tai Mo Shan misled investors by supporting the TerraUSD’s price, giving the false impression that the algorithmic stabilization mechanism was working as intended.
READ MORE: MicroStrategy Expands Board Ahead of Nasdaq 100 Inclusion
The controversy stems from the fact that Tai Mo Shan received early access to luna tokens as part of the deal, which it subsequently sold in the market. The SEC had previously alleged that Tai Mo Shan profited $1.28 billion through these actions. Terraform Labs’ founder, Do Kwon, had publicly celebrated the recovery of TerraUSD following what he termed a “black swan event,” but failed to mention the behind-the-scenes intervention, which the SEC claims deceived investors about the token’s true stability.
As part of the settlement, Tai Mo Shan did not admit or deny the SEC’s findings, and Jump Crypto’s president, Kanav Kariya, had previously invoked the Fifth Amendment when questioned about the deal. Additionally, Terraform Labs itself is facing its own penalties, agreeing to pay over $4 billion in fines following the collapse of its ecosystem, and is now in the process of winding down operations under U.S. bankruptcy proceedings.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
