WSJ finds out about market maker Jump Trading’s $1 billion deal with Terraform Labs

According to the publication, the company supported the TerraUSD stablecoin a year before its collapse

16.05.2023 - 07:25

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What’s new? Market maker Jump Trading made a secret deal to back Terraform Labs’ (TFL) TerraUSD stablecoin a year before it collapsed, The Wall Street Journal reports, citing court documents filed by the US Securities and Exchange Commission (SEC). According to the SEC’s lawsuit against TFL and its founder Do Kwon on fraud charges, Jump Trading received about $1 billion in transactions with the company.

The WSJ’s material

What else is known? The SEC’s lawsuit confirmed that Jump Trading was the unnamed US trading firm named in the original complaint that TFL made a secret deal with a market maker in May 2021 when TerraUSD lost its peg to the dollar. Under the terms of the agreement, Jump Trading purchased a large amount of TerraUSD, which boosted the price of the stablecoin and helped it regain its peg.

In exchange for helping TerraUSD regain its peg, TFL allowed Jump Trading to buy the LUNA token at 30, 40, and 50 cents over the next three years. The agreed-upon value allowed the market maker to buy the assets at a huge discount, ultimately bringing the company more than $1 billion.

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Jump Trading was among the companies whose representatives were questioned by US prosecutors as part of the Terra collapse investigation. Jump Crypto, the digital asset unit of Jump Trading, has been a major contributor to the project since 2019.

The SEC sued TFL and Do Kwon for “orchestrating a multi-billion dollar crypto asset securities fraud” and misleading investors about the stability of TerraUSD in February 2022. The regulator later accused Kwon of withdrawing 10 000 bitcoins from his own project and asked Swiss crypto bank Sygnum to freeze those funds.