Jump Trading made $1.28 billion by secretly propping up Terra a year before the algorithmic stablecoin collapsed, court filings show
Court filings by the Securities and Exchange Commission have confirmed that crypto trading firm Jump Trading propped up Do Kwon’s failed algorithmic stablecoin TerraUSD (UST) a year before its collapse.
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By purchasing more than 62 million of the stablecoin tokens, the Chicago-based firm pushed the algorithmic stablecoin's price back to $1 after it had lost its peg in May 2021, according to the court filings. Later, Kwon, CEO of Terra and cocreator of Terraform Labs, touted the recovery as proof of the stablecoin algorithm’s self-healing abilities and its ability to maintain a dollar peg through a code-enabled balancing act with sister cryptocurrency Luna.
The SEC had previously revealed in its complaint against Terraform Labs and Kwon that an unnamed third party trading partner had greatly profited from saving the Terra stablecoin from the brink of collapse. Citing unnamed sources, The Block first reported in February that the third party was Jump.
A year before Terra unraveled in what amounted to a crypto bank run on its algorithmic stablecoin, it received a multimillion-dollar cash injection, and in exchange, Terraform Labs, the company behind the Terra stablecoin, agreed to let Jump Trading buy Luna tokens for 30, 40, and 50 cents over a three-year period.
This arrangement netted Jump $1.28 billion, according to a complaint by the SEC accusing Kwon and Terraform Labs of securities fraud and selling unregistered securities. Jump Trading has not been accused of wrongdoing. Earlier this month an investor filed a class action lawsuit against Jump Trading and Jump Crypto president Kanav Kariya for the company's role in profiting from propping up Terra.
The most recent court filings by the SEC include a contract from November 2019 that outlines a three-year loan agreement between Terraform Labs and Jump subsidiary Tai Mo Shan Limited for 30 million Luna tokens with a 2% annualized interest also payable in Luna tokens.
Another of the documents released by the SEC includes an email Kwon sent to investors saying Terraform Labs had made an “important arrangement” with Jump and that the company had asked them to keep quiet about it, according to the Wall Street Journal.
Kwon is currently out on bail in Montenegro, where he awaits trial on charges that he attempted to use a forged Costa Rican passport. The U.S. and South Korea are both seeking to extradite him.
Jump did not immediately respond to a request for comment from Fortune. Jump Crypto, the digital assets trading unit, is planning to expand internationally and pull back from U.S. markets amid recent increased regulatory pressure, according to Bloomberg.
This story was originally featured on Fortune.com
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