SEC Fines Jump Trading Subsidiary $123 Million for TerraUSD Violations

​The U.S. Securities and Exchange Commission (SEC) has charged Tai Mo Shan Limited, a subsidiary of Jump Crypto, with violations related to TerraUSD and LUNA, imposing a $123 million fine. The SEC alleges that Tai Mo Shan misled investors about the stability of TerraUSD, marketed as an "algorithmic stablecoin" by Terraform Labs. The firm also reportedly engaged in unregistered securities transactions.

In May 2021, TerraUSD lost its $1 peg due to network issues. The SEC claims Tai Mo Shan agreed to purchase over $20 million in TerraUSD to restore its value after the decline. The SEC contends that Tai Mo Shan employed deceptive trading practices to mislead investors about the effectiveness of Terraform's mechanisms. Despite these claims, the firm's large purchases were vital in maintaining the stablecoin's perceived stability.

Additionally, the SEC determined that Tai Mo Shan acted as a statutory underwriter for LUNA transactions, acquiring tokens from Terraform for distribution in the U.S. market.

Although Tai Mo Shan has neither admitted nor denied the SEC's allegations, it has consented to a settlement that includes a civil penalty of $36,726,378, $12,916,153 in prejudgment interest, and $73,452,756 in disgorgement.

SEC Chair Gary Gensler noted that this case highlights the significant investor losses from fraud in the cryptocurrency market and stressed the need for compliance with securities laws.

Court filings revealed that Jump Crypto had an arrangement with Terraform Labs, reportedly earning up to $1 billion. A federal court previously found Terraform and founder Do Kwon liable for fraud and unregistered securities offerings.

Terraform Labs has agreed to pay $4.5 billion to settle its SEC lawsuit, which led to over $40 billion in investor asset losses. The firm has received court approval to wind down operations following a recent bankruptcy hearing.