In recent court filings submitted by the Securities and Exchange Commission (SEC), it has been revealed that Jump Trading, a prominent cryptocurrency trading firm, played a significant role in supporting the now-collapsed algorithmic stablecoin TerraUSD (UST) created by Do Kwon.
According to the disclosed documents, Jump Trading strategically acquired over 62 million tokens of TerraUSD, effectively boosting the price of the struggling stablecoin back to its intended value of $1. This intervention occurred in May 2021 when TerraUSD had lost its peg. Kwon, the CEO of Terra and co-creator of Terraform Labs, subsequently highlighted the recovery as a testament to the robustness of the stablecoin algorithm. He emphasized its self-healing capabilities and its ability to maintain a stable exchange rate with the U.S. dollar through a meticulously designed balancing act involving its counterpart cryptocurrency, Luna.
The involvement of Jump Trading, a Chicago-based firm known for its expertise in cryptocurrency trading, sheds light on the behind-the-scenes efforts to salvage the reputation and value of TerraUSD. These court filings provide a clearer understanding of the challenges faced by algorithmic stablecoins and the measures taken by industry players to maintain stability amidst market turbulence.
The SEC’s findings regarding Jump Trading’s actions in propping up TerraUSD raise questions about the transparency and integrity of the cryptocurrency ecosystem. It underscores the need for regulatory scrutiny and safeguards to protect investors and maintain the trustworthiness of digital assets. As the cryptocurrency landscape continues to evolve, regulatory bodies and industry participants must collaborate to establish robust frameworks that promote fair practices and mitigate potential risks associated with algorithmic stablecoins.
The Securities and Exchange Commission’s (SEC) lawsuit against Do Kwon’s Terraform Labs has revealed the identity of the unnamed third-party trading partner that allegedly profited from saving the Terra stablecoin from collapse. According to unnamed sources cited by The Block in February, the trading partner was Jump Trading.
Jump Trading had injected millions of dollars into Terra, agreeing in exchange to purchase Luna tokens for 30, 40, and 50 cents over a three-year period. The SEC alleges that Jump Trading made $1.28 billion from this arrangement. While the SEC accuses Kwon and Terraform Labs of securities fraud and selling unregistered securities, Jump Trading has not been accused of any wrongdoing.
The SEC’s recent court filings include a contract from November 2019 outlining a three-year loan agreement between Terraform Labs and Jump Trading subsidiary Tai Mo Shan Limited for 30 million Luna tokens. Another document includes an email from Kwon to investors, in which he stated that Terraform Labs had made an “important arrangement” with Jump Trading and requested that investors keep the arrangement quiet.
Kwon is currently awaiting trial on charges of attempting to use a forged Costa Rican passport and is out on bail in Montenegro. Both the U.S. and South Korea are seeking his extradition.
Bloomberg reported that Jump Crypto, the firm’s digital assets trading unit, is planning to expand internationally and withdraw from U.S. markets due to increased regulatory pressure.