Leap Crypto subsidiary Tai Mo Shan has filed for $123 million with the SEC
Jump Crypto subsidiary Tai Mo Shan agreed to pay $123 million with the United States Securities and Exchange Commission (SEC) on December 20.
According to the SEC, Tai Mo Shan has entered into an agreement with Terraform to buy Terra LUNA (LUNA) at a significant discount in 2021. Tai Mo Shan then bought $20 million in UST to maintain the algorithmic stablecoin's 1:1 exchange rate with the US dollar. SEC Chairman Gary Gensler had this to say about UST's failure:
“The impact reverberated throughout the crypto markets, ultimately costing the savings of countless investors. Regardless of the labels, crypto market participants must abide by the security rules as they apply and not deceive the public.”
The collapse of TerraUSD in May 2022 sent shockwaves through the crypto community and had a major impact on stablecoin regulations such as the 2024 Lummis-Gillibrand Stablecoin Act, which would ban algorithmic stablecoins.
Approving the settlement offer between Tai Mo Shan and the SEC. Source: SEC
Related: Stablecoins Will See Explosive Growth in 2025 as World Embraces Asset Class
The collapse of TerraUSD
TerraUSD, an algorithmically stable coin that maintains its peg with the US dollar through software and digital asset bonds, is due to crash in May 2022.
Algorithmic Stable Coin's descent began on May 8, 2022, when a whale dumped approximately $285 million in UST. This caused UST to miss the $1:1 peg and trade at $0.98.
On May 10, 2022, TerraUSD fell to $0.67, causing more liquidity among long-term traders and more fear, uncertainty, and doubt among investors.
In the midst of UST's free fall, the algorithmic stablecoin's market capitalization became much larger than the LUNA reserves that underwrite UST.
This indicates that the algorithm does not have enough reserves backing the stablecoin – causing investors to shy away from UST holdings, causing the price of UST to fall completely.
UST's collapse and subsequent collapse led to a formal investigation by US federal authorities of Terraform Labs and founder Do Kwon, and a massive $4.4 billion settlement.
Magazine: Unstable Coins: Devaluation, Bankruptcy and Other Risks Ahead.
