Key Takeaways:
- SEC exposed Jump Trading as the unnamed company that made fraudulent profits
- SEC provides additional documents regarding the debacle
- Jump Trading’s representative declines to comment
YEREVAN (CoinChapter.com) — The Securities and Exchange Commission published new court filings on May 12th as part of its recent fraud lawsuit against Do Kwon and Terraform Labs.
The filings state that Chicago-based Jump Trading entered a secret deal to boost the TerraUSD a year before its demise. Also, the filings highlight the ties between Jump Trading and Do Kwon himself.
The fillings also expose the Ilinois-based Jump as the unnamed U.S. trading firm that made about $1 billion in profit thanks to its dubious dealings with Terraform Labs, as stated by the SEC.
According to the Wall Street Journal article, the spokeswoman for Jump Trading chose not to comment.
The nitty gritty that SEC dug up
SEC unveiled that Do Kwon fail to disclose the deal with a U.S. firm that purchased a large amount of TerraUSD in order to peg back its price back to $1. This ”U.S. firm” later turned out to be Jump. The fillings also point out that a February Coindesk report was right that Jump was the aforementioned enigmatic firm.
In one of the SEC-issued documents, Do Kwon emailed investors in Terraform Labs about a crucial deal with Jump Trading. He asked the investors to keep the information confidential at Jump Tradings’ request.
Further details released by SEC
The SEC uncovered a January 2020 email revealing a deal by the terms of which Jump would boost the liquidity of TerraUSD and Luna. In turn, Jump would receive the ability to buy Luna at the prices of 30, 40, and 50, respectively, over the timeframe of three years.
A different SEC-issued document details the November 2019 agreement and its terms between Terraform Labs and Tai Mo Shan, an affiliate of Jump.
At the time of the 2020 email, Luna was trading about 20 cents. It surged, however, to above $90 in late 2021 and early 2022, so this leads to the demented market manipulator logic, which states that buying Luna for less than $1 and then selling it to investors during the Luna bull market is highly profitable.
The SEC also released an amended version of the Jump agreement that dates back to July 2021, which states that Terraform Labs will deliver 61.5 million Luna to Jump-associated Tai Mo Shan in monthly installments.
The amended version came after Do Kwon pleaded to Jump to save his algorithmic stablecoin in May 2021. This amended version also removed some of the conditions that Jump needed before in order to receive Luna tokens, according to SEC.
Setting the stage
TerraUSD and associated Luna collapsed in May 2022. Some, like market analyst The Onchain Wizard, claim that the algorithmic stablecoin became the target of well planned George Soros-esque attack. According to WSJ, this crash wiped about $40 billion in value from the crypto market. This cost thousands of investors their savings.
One year before the collapse, though, in May 2021, the stablecoin TerraUSD fell below its intended $1 peg to about 90 cents before a recovery was staged. Days before the price fall, Kwon “joked” about the situation on Twitter. His joke, however, had an extremely short shelf life.
Lawyers for Kwon and Terraform Labs have asked the judge to dismiss the SEC’s lawsuit and respond to the allegations. They said the firm wasn’t the only one responsible for TerraUSD’s recovery in May 2021.
They argued that they have data that shows its purchases were just a tiny 6% of the total transactions. Federal prosecutors charged Kwon with eight criminal counts of fraud stemming from the crash. Kwon is currently in Montenegro, where he was arrested in March.
While trying to escape to Dubai, he was caught by local Montenegrin authorities and charged with forgery of documents. As of May 2023, Kwon is under house arrest and awaits trial. The U.S. and South Korea sought and still seek the extradition of Kwon.
The SEC believes that this case is an example of multibillion securities fraud.
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