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Do Kwon Failed to Reveal $1 Billion Deal With Jump Trading, Says SEC

2 mins
Updated by Geraint Price
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In Brief

  • The U.S. SEC accused Do Kwon of not disclosing a market-making relationship with Jump Trading.
  • Kwon didn't disclose how Jump helped prop up TerraUSD in 2021.
  • Jump Trading's crypto arm was involved in Terra liquidity almost since its inception.
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The U.S. Securities and Exchange Commission (SEC) alleges that Jump Trading earned $1.2 billion from a deal to boost Terra’s liquidity before it collapsed.

The agency filed court papers Friday naming Jump as the anonymous beneficiary mentioned in its civil suit against Kwon in December.

Jump Earned Big During Terra Luna Bull Market

Jump allegedly bought “tens of millions” of dollars in the LUNA (now LUNC) coin to restore the broken dollar peg of its sister coin TerraUSD (UST). Kwon said Terra maintained its $1 value algorithmically rather than through Jump’s contribution.

According to SEC court filings, Kwon confidentially revealed Jump’s investment in 2020 to investors in Terraform Labs, the entity backing TerraUSD.

An email outlined a three-year agreement with crypto-linked Jump affiliate Tai Mo Shan. LUNA’s price increased from $0.20 in 2020 to above $90 in 2022, allegedly earning Jump over $1 billion.

Jump Trading Rode Terra Luna Classic Rally
LUNC/USD Price Chart | Source: BeInCrypto

In response to the charges, Kwon’s lawyers said Jump’s LUNA buys only accounted for 6% of Terraform’s transactions used to restore UST’s peg.

TerraUSD fell to mere pennies in May 2022 after large weekend withdrawals broke its dollar peg, sending itself and its sister coin, LUNA, tumbling. The two assets algorithmically kept TerraUSD at $1.

The SEC and the U.S. Department of Justice have charged Kwon with the $40 billion collapse of TerraUSD. The Stanford alumnus remains under Montenegrin house arrest pending a passport fraud trial.

Kwon’s lawyers will likely only formally respond to the criminal charges if the United States extradites the former crypto boss. They have asked U.S. courts to dismiss civil charges they believe the SEC didn’t have the jurisdiction to bring.

Jump Crypto CEO Admits Company Offered Liquidity to New Projects

Terraform Labs investors recently sued Jump Trading and its boss Kanav Kariya, following rumors on social media that Jump was the unnamed partner in the original SEC suit.

The lawsuit alleges Jump’s LUNA buys from Terraform broke the U.S. Commodity Exchange Act and other Commodity Futures Trading Commission (CTFC) rules. The CFTC regulates derivatives in the U.S., including futures and options that Jump offers.

Investors allege that Jump’s Solana validator and acquiring a wormhole bridge boosted its UST business artificially.

Quant trading firm Jump Trading started investing in crypto through a new arm called Jump Crypto in 2021. Jump Crypto builds blockchain software and tooling and contributes liquidity to crypto markets.

In 2021, Kariya said that projects had asked the firm to inject liquidity and drive early participation. The firm also voted in Terra governance proposals surrounding the stablecoin’s liquidity.

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...