SEC Fees Jump Crypto Sub for Terra UST Trick

Jump Crypto wholly-owned Tai Mo Shan has reached a $123 million settlement with the US Securities and Exchange Commission (SEC) for his role in misleading investors about the TerraUSD (UST) stablecoin.

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

Tai Mo Shan settles with SEC over TerraUSD claims of misrepresentation.

On December 20, the SEC highlighted Tai Mo Shan's fraudulent practices during the UST diving crisis. The organization bought more than $20 million worth of stablecoin and tried to stabilize UST.

The SEC falsely suggested to the market that Terra's algorithmic strategies were effectively preserving value. But this move could not prevent widespread disruption and huge investor losses caused by the event.

The SEC also charged Tai Mo Shan with acting as the legal secretary for Terra Luna Token. The agency said that the company manages these assets as collateral through unregistered transactions. Their strategy includes planning to distribute these tokens on US-based trading platforms from January 2021 to May 2022.

SEC Chairman Gary Gensler emphasized the broader impact of the incident:

“[The impact of UST deppging] It flipped in the crypto markets, ultimately costing the savings of countless investors. Regardless of the labels, crypto market participants must comply with security laws when they apply and not deceive the public. Otherwise, investors will suffer.

Tai Mo Shan will pay $73,452,756 in disgorgement, $12,916,153 in prejudgment interest and $36,726,378 in civil penalties as part of the settlement. The firm neither admitted nor denied the SEC's findings, but agreed to a cease-and-desist order to prevent future violations of registration and fraud regulations.

The settlement comes shortly after Terraform and its founder Do Kwon were found guilty of fraud and unregistered securities offerings. They agreed to pay a whopping $4.5 billion to compensate injured investors.

In January 2024, Terraform Labs declared bankruptcy. Following this, the company transferred control of the Terra Blockchain to the public and discontinued several products and services.