SEC Says Jump Trading Secretly Propped Up Do Kwon’s TerraUSD 14

SEC Says Jump Trading Secretly Propped Up Do Kwon’s TerraUSD

  • Court filings by the U.S. SEC claim that Jump Trading entered a secret deal with Do Kwon in 2021. 
  • Jump Trading allegedly propped up Terraform Labs’ TerraUSD stablecoin a year before it collapsed. 
  • The deal allowed TerraUSD to regain its dollar peg in 2021 in exchange for a discount on Luna purchases by Jump. 

Chicago-based Jump Trading is once again in the crosshairs of the U.S. Securities and Exchange Commission (SEC) as recent court filings by the securities regulator highlight a secret deal between the high-frequency trading firm and the now defunct Terraform Labs involving the latter’s TerraUSD stablecoin. 

Jump Trading Made Over $1 Billion After Secret Deal With Do Kwon

According to a report by the Wall Street Journal, recent court filings made by the SEC as part of its ongoing fraud lawsuit against Terraform Labs co-founder Do Kwon confirmed that Jump Trading was the unnamed U.S. trading firm that was listed in the initial complaint. The complaint alleged that when the TerraUSD stablecoin lost its peg to the US Dollar in May 2021, Kwon and Terraform Labs entered into a secret deal with Jump Trading to prop up its price. As per said deal, Jump purchased large amounts of TerraUSD which drove up the stablecoin’s price and helped it regain its peg. 

In exchange for helping restore TerraUSD’s peg, Terraform Labs allowed Jump to buy its Luna token at 30, 40, and 50 cents over the next three years. The agreed-upon price allowed Jump Trading to scoop up Luna tokens at a massive discount, which ultimately netted more than $1 billion for the trading firm. Reports of Jump’s involvement with Terraform Labs’ started circulating earlier this year after the SEC filed charges against Do Kwon and his crypto firm. 

Jump Trading’s role in helping TerraUSD regain its dollar pegs contradicts the claims made by Do Kwon about the stablecoin’s self-healing capability. The SEC has accused Kwon of making misleading statements about the capabilities of the stablecoin’s underlying algorithm while keeping investors in the dark about secret deals that actually propped up TerraUSD. As of now, Jump Trading has not been accused of any wrongdoing in connection with the stablecoin or Terraform Labs’ collapse in May last year.