Jump Trading is the masked “U.S. trading firm” that the United States Securities and Exchange Commission (SEC) accused of propping the TerraUSD, UST, and preventing the stablecoin from de-pegging in 2021, reports on Feb. 17 show.
On Feb. 16, the SEC filed charges against Terraform Labs, the developer of TerraUSD and LUNA, as well as the CEO of the company, Do Kwon. One of the allegations in the complaint is that the defendants deceived investors by claiming that they would use a “U.S. trading firm” to support TerraUSD’s value in May 2021. Instead, according to the comments made by the individuals, that company was Jump Trading.
The SEC has neither filed any charges against Jump Trading nor accused the company of engaging in illegal activity. However, the U.S. regulator claims that Jump Trading made around $1.28b from this transaction.
What’s happening at Terra?
TerraUSD, the stablecoin most often referred to by its ticker UST, failed in May 2022, causing losses worth tens of billions of dollars to invest. The assertion that Terraform employed human traders to shore the algorithmic stablecoin rather than the software algorithm it said backed the system is at the center of this suit.
According to the SEC’s complaint, in May 2021, when the UST became ‘unpegged’ from the value of the U.S. dollar, Terraform, via Kwon, covertly discussed arrangements with a third party, the ‘U.S. trading business’, to acquire substantial quantities of UST to restore its value.
Defendants fraudulently and misleadingly asserted that UST’s algorithm had successfully re-pegged UST on the dollar when UST’s price moved back up due to these efforts, according to the lawsuit states.
Where does Jump come in?
The depegging in May 2021 occurred four months before Jump Crypto was formally introduced to the public.
Since around November 2019, the SEC has accused Terraform of collaborating with an unnamed trading business. In return for remuneration, the company acted as a market maker for LUNA and TerraUSD, with the latter currency often being paid for at a discount to LUNA’s spot pricing.
The SEC claims that Terraform improved the terms of the agreement after the trading business stepped in to support TerraUSD in May 2021. So, regardless of whether LUNA was trading at $90 or $0.40, the trading business would get them consistently at a lower price.
The SEC has accused Terraform Labs and Kwon of taking billions of dollars from investors by marketing and selling an inter-connected suite of crypto asset securities, many in unregistered transactions” . This is in addition to the charges concerning the de-pegging of TerraUSD. The SEC defined “mAssets” as security-based swaps that are meant to generate returns by tracking the value of TerraUSD and stocks of U.S. companies.