Jump Crypto Unit Settles With SEC for $123 Million Over TerraUSD Misconduct

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As a seasoned crypto investor with a knack for navigating the volatile landscape of digital assets, I can’t help but feel a mix of dismay and caution as I witness yet another high-profile case of regulatory action against a key player in the industry. The $123 million settlement between Tai Mo Shan and the SEC serves as a stark reminder that even the most established players are not immune to the wrath of regulators when it comes to questionable practices.

The main company under Jump Crypto’s control, named Tai Mo Shan, has reached a $123 million agreement with the U.S. Securities and Exchange Commission (SEC). This settlement is in relation to their part in deceiving investors about the stability of the TerraUSD (UST) stablecoin.

Jump Crypto, a branch of the Chicago-based trading company Jump Trading, played a crucial role in Terra’s network. However, it’s important to note that this division is now being scrutinized by the U.S. Commodity Futures Trading Commission (CFTC).

Tai Mo Shan Settles With SEC for Misleading TerraUSD Claims

On December 20th, the SEC called out Tai Mo Shan for their misleading tactics during the UST depegging predicament. The company tried to restore stability in UST by acquiring more than $20 million worth of the stablecoin.

The Securities and Exchange Commission alleged that these actions gave a false impression that Terra’s algorithmic systems were successfully stabilizing its value. Unfortunately, these actions did not manage to halt the extensive chaos and substantial financial losses experienced by investors due to the depegging incident.

Additionally, the SEC accused Tai Mo Shan of functioning as a statutory underwriter for Terra Luna tokens. The agency claimed that the company handled these assets as securities through unregistered transactions. Their approach involved organizing the distribution of these tokens on US-based trading platforms from January 2021 to May 2022.

SEC Chair Gary Gensler emphasized the broader impact of the incident, stating:

As a researcher studying the dynamics of cryptocurrency markets, I cannot stress enough the far-reaching effects that the collapse of UST had on our digital financial landscape. Many hardworking investors found their savings diminished as a result. It is crucial for all market participants to adhere to securities laws in any jurisdiction where they apply, and to avoid misleading or deceiving the public at large. Failure to do so can result in unnecessary harm to investors.

In the settlement agreement, Tai Mo Shan is required to repay approximately $73 million in disgorgement, about $12.9 million in pre-judgment interest, and impose a civil penalty worth around $36.7 million. The firm neither admitted nor denied the Securities and Exchange Commission’s (SEC) findings but consented to a cease-and-desist order to prevent any future infractions of registration and fraud regulations.

This settlement comes shortly after Terraform and its founder Do Kwon were found liable for fraud and unregistered securities offerings. They agreed to a substantial $4.5 billion payment to compensate affected investors.

By January 2024, Terraform Labs announced they were filing for bankruptcy. Consequently, they handed over management of the Terra blockchain to the public community and ceased several of their offerings and operations.

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2024-12-21 20:54