Explosive Revelation: SEC Exposes Jump Trading Secret Plot to Sustain TerraUSD Stablecoin
New court documents reveal that high-speed trading firm Jump Trading, based in the United States, entered into a confidential agreement to support the TerraUSD cryptocurrency prior to its eventual collapse.
These filings, released by the Securities and Exchange Commission (SEC), shed light on the connection between Jump Trading, Chicago-based crypto mogul Do Kwon, and his company Terraform Labs. According to the SEC, Jump Trading is the unnamed U.S. trading firm mentioned in the fraud lawsuit, which allegedly earned around $1 billion in profits through its transactions with Terraform Labs.
Jump Trading has not been accused of any wrongdoing in relation to TerraUSD or the coin’s collapse in May 2022. The collapse had a significant impact, wiping out approximately $40 billion in crypto market value and causing financial losses for many investors.
In May 2021, a year prior to the collapse, the stablecoin TerraUSD experienced a drop below its $1 peg, falling to around 90 cents before recovering. Do Kwon subsequently highlighted this recovery as evidence of TerraUSD’s “automatic self-healing” mechanism, reinforcing investors’ confidence in the algorithmic system that was meant to maintain the coin’s value relative to the U.S. dollar, as stated in the SEC’s lawsuit filed in February.
The SEC has revealed that Do Kwon, the disgraced crypto mogul behind Terraform Labs, failed to disclose a secret agreement with Jump Trading, a U.S. firm. According to the SEC, Jump Trading purchased tens of millions of dollars worth of TerraUSD to manipulate its price back to $1. The newly released court filings confirm previous reports from CoinDesk and social media rumors that identified Jump as the unnamed firm in the SEC’s lawsuit.
Following the TerraUSD crash, a class-action lawsuit was filed against Jump and the head of its crypto division by a New Jersey investor who suffered losses. In one of the documents, Do Kwon emailed Terraform Labs investors, referring to an undisclosed arrangement with Jump Trading and requesting confidentiality as per Jump’s request.
The email, dated January 2020, outlined a deal in which Jump would enhance the liquidity of “Terra and Luna”. According to WSJ, Jump would receive options to purchase Luna at prices ranging from 30 to 50 cents over the course of three years, as stated in the email. Another document released by the SEC is a November 2019 agreement between Terraform Labs and Tai Mo Shan, a crypto-trading affiliate of Jump, which outlined the terms of the three-year deal.
During the time of the email, Luna was trading at around 20 cents. However, it surged to over $90 in late 2021 and early 2022, coinciding with the peak popularity of Luna and TerraUSD. This suggests that buying Luna for less than $1 and selling it during the Luna bull market would have been highly profitable.
The SEC has released an updated version of the agreement between Jump Trading and Terraform Labs, which reveals that Terraform Labs committed to delivering 61.5 million Luna tokens to Jump’s affiliate, Tai Mo Shan, in monthly installments starting from July 2021.
This amended agreement removed certain conditions that Jump had previously needed to fulfill to receive the Luna tokens, following Do Kwon’s plea to Jump to save his stablecoin in May 2021. The SEC has highlighted these details in its lawsuit against Do Kwon and Terraform Labs.
Do Kwon’s lawyers and Terraform Labs have requested the dismissal of the SEC’s lawsuit, arguing that the agency lacks jurisdiction and disputing the fraud allegations. In response to the SEC’s claims regarding Jump, Do Kwon’s legal team stated that the firm’s actions were not solely responsible for the recovery of TerraUSD in May 2021. They presented data showing that Jump’s purchases accounted for only 6% of the total transactions that contributed to restoring the peg of TerraUSD at that time.
Additionally, Do Kwon is facing criminal charges related to fraud brought by federal prosecutors in connection with the collapse of TerraUSD. However, his lawyers have not officially responded to the criminal charges and are unlikely to do so unless he is extradited to the United States. South Korea, Do Kwon’s home country, has also sought his extradition.
Do Kwon has pleaded not guilty to the forgery charges. Recently, a court in Montenegro granted him bail, allowing him to await trial under house arrest.
