Jump Trading in Hot Water With SEC For $1.2B Terra Deal

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The U.S. Secu­ri­ties and Exchange Com­mis­sion (SEC) alleges that Jump Trad­ing earned $1.2 bil­lion from a deal to boost Terra’s liq­uid­i­ty before it collapsed.

The agency filed court papers Fri­day nam­ing Jump as the anony­mous ben­e­fi­cia­ry men­tioned in its civ­il suit against Kwon in December.

Jump Earned Big During Terra Luna Bull Market

Jump alleged­ly bought “tens of mil­lions” of dol­lars in the LUNA (now LUNC) coin to restore the bro­ken dol­lar peg of its sis­ter coin Ter­raUSD (UST). Kwon said Ter­ra main­tained its $1 val­ue algo­rith­mi­cal­ly rather than through Jump’s contribution.

Accord­ing to SEC court fil­ings, Kwon con­fi­den­tial­ly revealed Jump’s invest­ment in 2020 to investors in Ter­raform Labs, the enti­ty back­ing TerraUSD. 

An email out­lined a three-year agree­ment with cryp­to-linked Jump affil­i­ate Tai Mo Shan. LUNA’s price increased from $0.20 in 2020 to above $90 in 2022, alleged­ly earn­ing Jump over $1 billion.

Jump Trading Rode Terra Luna Classic Rally
LUNC/USD Price Chart | Source: BeIn­Cryp­to

In response to the charges, Kwon’s lawyers said Jump’s LUNA buys only account­ed for 6% of Terraform’s trans­ac­tions used to restore UST’s peg.

Ter­raUSD fell to mere pen­nies in May 2022 after large week­end with­drawals broke its dol­lar peg, send­ing itself and its sis­ter coin, LUNA, tum­bling. The two assets algo­rith­mi­cal­ly kept Ter­raUSD at $1.

The SEC and the U.S. Depart­ment of Jus­tice have charged Kwon with the $40 bil­lion col­lapse of Ter­raUSD. The Stan­ford alum­nus remains under Mon­tene­grin house arrest pend­ing a pass­port fraud trial. 

Kwon’s lawyers will like­ly only for­mal­ly respond to the crim­i­nal charges if the Unit­ed States extra­dites the for­mer cryp­to boss. They have asked U.S. courts to dis­miss civ­il charges they believe the SEC didn’t have the juris­dic­tion to bring.

Jump Crypto CEO Admits Company Offered Liquidity to New Projects

Ter­raform Labs investors recent­ly sued Jump Trad­ing and its boss Kanav Kariya, fol­low­ing rumors on social media that Jump was the unnamed part­ner in the orig­i­nal SEC suit. 

The law­suit alleges Jump’s LUNA buys from Ter­raform broke the U.S. Com­mod­i­ty Exchange Act and oth­er Com­mod­i­ty Futures Trad­ing Com­mis­sion (CTFC) rules. The CFTC reg­u­lates deriv­a­tives in the U.S., includ­ing futures and options that Jump offers.

Investors allege that Jump’s Solana val­ida­tor and acquir­ing a worm­hole bridge boost­ed its UST busi­ness artificially.

Quant trad­ing firm Jump Trad­ing start­ed invest­ing in cryp­to through a new arm called Jump Cryp­to in 2021. Jump Cryp­to builds blockchain soft­ware and tool­ing and con­tributes liq­uid­i­ty to cryp­to markets.

In 2021, Kariya said that projects had asked the firm to inject liq­uid­i­ty and dri­ve ear­ly par­tic­i­pa­tion. The firm also vot­ed in Ter­ra gov­er­nance proposals sur­round­ing the stablecoin’s liquidity.

For BeInCrypto’s lat­est Bit­coin (BTC) analy­sis, click here.

Disclaimer

In adher­ence to the Trust Project guide­lines, BeIn­Cryp­to is com­mit­ted to unbi­ased, trans­par­ent report­ing. This news arti­cle aims to pro­vide accu­rate, time­ly infor­ma­tion. How­ev­er, read­ers are advised to ver­i­fy facts inde­pen­dent­ly and con­sult with a pro­fes­sion­al before mak­ing any deci­sions based on this content.

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