The U.S. Securities and Exchange Commission (SEC) has decided to fine Tai Mo Shan Limited, a wholly-owned subsidiary of Jump Crypto Holdings, $123 million for deceiving investors about the stability of Terra USD, an "Algorithmic Stablecoin" issued by Terraform Labs PTE Ltd. (Terraform).
Tai Mo Shan is also accused of conducting unregistered securities transactions. The SEC determined that the company acted as an underwriter under the law for certain offerings and sales of LUNA, a Token also issued by Terraform and sold as a security.
SEC Chair Gary Gensler stated:
"This case is a reminder that, in the crypto market, we've seen too many instances where investors have suffered significant losses due to fraud."
He emphasized that Tai Mo Shan's illegal actions had a negative impact on the entire crypto market, causing significant losses for investors. He also warned market participants to strictly comply with securities regulations and avoid deceiving the public about the safety of investments.
TerraUSD operated at a fixed value of $1 through a system of algorithms combined with a trading mechanism related to LUNA. However, when the system came under stress and showed signs of depegging, Tai Mo Shan executed large buy transactions in an attempt to stabilize the value of TerraUSD. According to the SEC, these transactions created the impression that the algorithmic mechanism was still functioning normally, but in reality, this was a fraudulent tactic.
Tai Mo Shan's large buy transactions occurred around May 2021, when the value of TerraUSD fell below the $1 peg. The company purchased over $20 million from Terraform.
Under the settlement agreement, Tai Mo Shan has agreed to pay a total of $73,452,756 in disgorgement, $12,916,153 in prejudgment interest, and $36,726,378 in civil penalties. While not admitting or denying the SEC's findings, Tai Mo Shan has agreed to cease and desist from the registration and fraud violations it committed.
According to SEC court records, Jump Crypto had an agreement with Terraform to support TerraUSD and could have earned up to $1 billion in profits from this agreement. After Terraform agreed to pay around $4.5 billion to settle the SEC's lawsuit over the collapse of the company, the incident shook the entire crypto market, wiping out $40 billion in investor assets.
The Luna Foundation has established a Guardians team, which includes Kanav Kariya, who has transitioned from an intern to the president of Jump Crypto. The Luna Foundation Guard is responsible for overseeing the TerraUSD reserve fund. The SEC's lawsuit against Jump Trading was initiated during the crypto winter and has now been resolved.
Disclaimer: This article is for informational purposes only and not investment advice. Investors should do their own research before making decisions. We are not responsible for your investment decisions.
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