The SEC charged Jump Crypto subsidiary Tai Mo Shan with deceptive practices to stabilize Terra Stablecoin’s UST peg, misleading investors about its algorithmic mechanisms. The firm allegedly violated securities laws by underwriting and reselling Luna tokens on U.S. platforms.
In an effort to maintain the $1 basis of the terrausd, Tai Mo Shan, a subsidiary of Jump Crypto Holdings, was accused of engaging in deceptive practices.
The firm acquired more than $20 million in terrausd (UST) on days when its value fell below $1, as per the SEC complaint. Investors were purportedly deceived into believing that UST’s algorithmic mechanisms, which were intended to preserve the peg, were operating autonomously as a result of these actions.
Terraform Labs, which provided discounted options for its sister token, Luna, allegedly incentivized Tai Mo Shan’s trading, according to the SEC. The allegations also encompass violations of securities laws in the underwriting and sale of Luna tokens.
According to the SEC order, Tai Mo Shan allegedly served as a statutory underwriter by purchasing Luna from Terraform Labs and subsequently reselling it as securities on U.S.-based crypto platforms between January 2021 and May 2022.
The collapse of UST in May 2022, known as a key event during the so-called “crypto winter,” triggered significant losses in the cryptocurrency market. Terraform Labs and its founder, Do Kwon, were previously found liable for fraud this year, resulting in a $4.5 billion settlement with affected investors.
Tai Mo Shan consented to pay a $36.7 million civil penalty, $12.9 million in prejudgment interest, and $73.5 million in disgorgement, without acknowledging or disputing the SEC’s findings. The company also pledged to refrain from violating the registration and fraud provisions of U.S. securities laws.
In his statement, SEC Chair Gary Gensler underscored the case’s broader implications, stating, “Here, the impact reverberated throughout the crypto markets, eventually costing the savings of countless investors.” Gensler will vacate his position this year as the Trump administration assumes control of the White House.