Tai Mo Shan, a wholly owned subsidiary of Jump Crypto, has reached a $123 million settlement with the U.S. Securities and Exchange Commission (SEC) related to their role in misrepresenting the stability of the TerraUSD (UST) stablecoin.
Jump Crypto, a subsidiary of the Chicago-based proprietary trading firm Jump Trading, was a core element in the Terra ecosystem. The company is currently under investigation by the U.S. Commodity Futures Trading Commission (CFTC).
Tai Mo Shan Settles with SEC Over Misrepresentations About TerraUSD
On December 20, the SEC cited Tai Mo Shan's fraudulent conduct during the UST de-pegging crisis. The company had attempted to stabilize UST by purchasing over $20 million of this stablecoin.
The SEC stated that this action created a false signal to the market that Terra's algorithmic mechanisms were effectively maintaining its value. However, this action did not prevent the widespread disruption and significant investor harm caused by the de-pegging event.
Furthermore, the SEC charged Tai Mo Shan with acting as an unregistered broker-dealer for Terra Luna Tokens. The agency claimed the company managed these assets as securities through unregistered transactions. Their strategy included planning to distribute these Tokens on U.S.-based trading platforms from January 2021 to May 2022.
SEC Chair Gary Gensler emphasized the broader impact of the events, stating:
"[The UST de-pegging] reverberated across the crypto market, ultimately wiping out the savings of countless investors. Regardless of the label, participants in the crypto markets must comply with the securities laws when applicable and not mislead the public. If they don't, investors will pay the price."
Tai Mo Shan will pay $73,452,756 in disgorgement, $12,916,153 in prejudgment interest, and a $36,726,378 civil penalty as part of the settlement. 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 antifraud provisions.
This settlement comes shortly after Terraform and founder Do Kwon were identified as responsible for fraud and unregistered securities offerings. They agreed to a substantial $4.5 billion payout 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 many of its products and services.
