Jump Crypto will pay $123 million for manipulating the UST stablecoin in May 2021

What’s new? The US Securities and Exchange Commission (SEC) has fined a subsidiary of cryptocurrency market maker Jump Crypto, Tai Mo Shan, $123 million for manipulating the rate of the UST algorithmic stablecoin of Do Kwon’s collapsed Terra project.

Press release

What else is known? The regulator alleges that the company engaged in trading activities as early as May 2021 to conceal the loss of UST’s peg to the dollar. According to the SEC’s civil lawsuit, when UST dropped below $1, its developer Terraform Labs (TFL) engaged Tai Mo Shan to buy more than $20 million worth of coins.

In doing so, TFL falsely claimed that the dollar peg was supported by an algorithmic mechanism at the core of the coin. In reality, it was the trading activities of TFL’s subsidiary Jump Crypto that helped stabilize the exchange rate.

For Tai Mo Shan, in turn, participating in manipulative trades opened up the opportunity to purchase Terra (LUNA) native tokens at an undervalued price once UST stabilized.

In addition to allegations of market manipulation, the company faced claims regarding the distribution of unregistered securities in the form of LUNA tokens because it functioned as an underwriter, receiving assets from TFL and promptly selling them in the market.

Tai Mo Shan neither admitted nor denied the claims, but agreed to pay the full amount of the fine, including $73,5 million in damages.

TFL’s Terra blockchain collapsed in May 2022 when the LUNA and UST rates plummeted to near zero. The community then conducted a fork, whereby the old assets continued to exist on the Terra Classic network (LUNC and USTC), while the new project retained the original name and tickers.

TFL founder Do Kwon faced fraud allegations in several countries. After being caught in March 2023, he is in Montenegro, where he is awaiting a decision from the DOJ on whether to extradite him to his native South Korea, or the United States.

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Earlier this year, the SEC fined TFL a record $4,5 billion, prompting the company to announce it was shutting down and putting the project in the hands of the community.