The U.S. Securities and Exchange Commission (SEC) has fined Tai Mo Shan Limited, a wholly owned subsidiary of Jump Crypto Holdings, $123 million for misleading investors about the stability of TerraUSD, an “algorithmic stablecoin” issued by Terraform Labs PTE Ltd. (Terraform).
Tai Mo Shan was accused of trading unregistered securities, including the offering and sale of LUNA as a security. SEC Chairman Gary Gensler stated that the company’s illegal activities caused significant losses to investors and harmed the entire cryptocurrency market.
He emphasized the need for compliance with securities laws and the protection of investors from fraud.
Tai Mo Shan Agrees to Settle the Fine
Tai Mo Shan made large purchases to stabilize TerraUSD during network stress, creating the impression that the algorithmic mechanism was functioning correctly. However, the SEC claimed this was a fraudulent tactic to deceive investors about the coin’s stability.
In May 2021, Tai Mo Shan executed large purchases worth over $20 million to stabilize TerraUSD when its price dropped below $1. The company has agreed to pay $73.45 million in restitution, $12.92 million in pre-judgment interest, and $36.73 million in civil penalties. While not admitting or denying the violations, Tai Mo Shan has agreed to cease its illegal activities.
SEC Reveals Jump Crypto’s Involvement in TerraUSD Collapse
Jump Crypto had an agreement with Terraform to support TerraUSD, making up to $1 billion in profit. Terraform later agreed to pay around $4.5 billion to settle the SEC lawsuit over the company’s collapse, which caused $40 billion in losses for investors. The Luna Foundation, with Kanav Kariya as the president of Jump Crypto, was responsible for overseeing the TerraUSD reserve fund.
The SEC’s lawsuit against Jump Trading was resolved after the cryptocurrency winter.