Jump Crypto CEO Under Investigation For Alleged Secret Deal Amid TerraUSD Collapse

Key Points:

• The SEC is investigating whether former Jump Crypto CEO Kanav Kariya had a secret agreement with Terraform Labs’ Do Kwon during the collapse of stablecoin TerraUSD.
• Jump Crypto’s involvement was to help restore UST’s peg by purchasing tokens.
• Allegations include manipulation of prices and fraudulent schemes involving unregistered securities LUNA and UST.

The SEC is investigating whether Kanav Kariya, the former Jump Crypto CEO, entered into a secret agreement with Do Kwon, the president of Terraform Labs, during the collapse of the stablecoin TerraUSD.

The investigation focuses on Jump Crypto’s involvement in helping to restore UST’s peg by purchasing tokens. The SEC has alleged that Kwon engaged in a fraudulent scheme worth $40 billion through unregistered securities LUNA and UST.

According to a deposition by SEC counsel Devon Staren, it is suggested that Kariya and Kwon made a deal on May 23, 2021, after UST had depegged. UST, Kwon’s algorithmic stablecoin, experienced a significant drop in value from around $1 to approximately $0.30 cents on May 9, 2021, and LUNA, the token intended to stabilize UST, plummeted by around 99% by May 12, 2021.

Alleged Agreement Terms and Jump Crypto CEO’s Response

Staren’s questioning revealed that the terms of the alleged agreement were for Jump to help restore UST’s peg by purchasing the token, and in return, Kwon would amend Jump’s LUNA loan agreement and lift the vesting conditions. However, Kariya invoked his right to resist self-incrimination and declined to answer the question during the deposition.

These allegations align with a civil class action suit filed against Jump Crypto, accusing them of manipulating the price of UST and AnchorUST between May 23, 2021, and May 31, 2022. The lawsuit claims that Kwon agreed to modify prior agreements and provide Jump with over 61.4 million LUNA tokens at a significant discount, which Jump later sold for a profit of over $1.28 billion.

In the ongoing SEC case against Terraform Labs, both parties have motioned for a summary judgment. The defense argues that the SEC has not sufficiently proven Kwon’s violation of securities laws, while the SEC contends that token holders were clearly making an investment.

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