Taimoshian, a wholly-owned subsidiary of Jump Crypto, reached a $123 million settlement with the U.S. Securities and Exchange Commission (SEC) for its role in misleading investors about the stability of the TerraUSD (UST) stablecoin.
Jump Crypto, the subsidiary of the proprietary trading firm Jump Trading headquartered in Chicago, played a crucial role in Terra's ecosystem. The company is currently under investigation by the U.S. Commodity Futures Trading Commission (CFTC).
Taimoshian Settles with SEC Over False Claims About TerraUSD
On December 20, the SEC highlighted Taimoshian's deceptive practices during the UST de-pegging crisis. The company attempted to stabilize UST by purchasing over $200 million in stablecoins.
The SEC claimed this sent a false signal to the market that Terra's algorithmic mechanism was effectively maintaining its value. However, this action failed to prevent the widespread disruption and significant investor losses caused by the de-pegging incident.
The SEC also accused Taimoshian of acting as the legal custodian of Terra LUNA tokens. The agency alleged the company managed these assets as securities through unregistered transactions. Their strategy was to plan the distribution of these tokens on U.S.-based trading platforms from January 2021 to May 2022.
SEC Chair Gary Gensler emphasized the broad impact of the incident, stating:
"[The impact of the UST de-pegging] reverberated across the crypto markets, ultimately causing many investors to lose their savings. Regardless of the label, crypto market participants must comply with applicable securities laws and not mislead the public. Otherwise, investors will suffer the consequences."
As part of the settlement, Taimoshian will pay $73,452,756 in disgorgement, $12,916,153 in prejudgment interest, and $36,726,378 in civil penalties. The company neither admitted nor denied the SEC's findings but agreed to a cease-and-desist order to prevent future violations of the registration and anti-fraud provisions.
This settlement came shortly after Terraform and its founder Do Kwon acknowledged responsibility for fraud and the unregistered offering of securities. They agreed to pay a substantial $450 million to compensate affected investors.
In January 2024, Terraform Labs declared bankruptcy. The company subsequently handed over control of the Terra blockchain to the community and discontinued several products and services.
