Jump Crypto Subsidiary Tai Mo Shan Fined $73.45M Over UST Scandal

Key Points:

• The SEC charged Tai Mo Shan Limited, a Jump Crypto subsidiary, with misleading investors and engaging in unregistered securities transactions involving UST.
• Tai Mo Shan allegedly stabilized TerraUSD’s value during its collapse in May 2021 by purchasing $20 million of the token, misleading investors about its algorithmic stability.

The U.S. Securities and Exchange Commission charged Tai Mo Shan Limited, a subsidiary of Jump Crypto, with misleading investors and conducting unregistered securities transactions in TerraUSD and its sister cryptocurrency, LUNA.

Read more: Jump Crypto Identified As Third-Party Trading Firm Profit $1.28 Billion From Crash UST 

SEC Fines Tai Mo Shan $123M for TerraUSD Misconduct

Tai Mo Shan will pay $123 million in a settlement that includes disgorgement of profits, interest, and penalties.

In facilitating the issuance and selling of LUNA, security as declared by the SEC, Tai Mo Shan acted as a statutory underwriter. The company would have to pay $73.4 million in illegal gains and $12.9 million in interest on top of the $36.7 million in civil penalties. Though it neither denied nor admitted the allegations, Tai Mo Shan agreed to cease the violations of securities laws.

The SEC alleged that Tai Mo Shan’s trading practices misled investors about TerraUSD’s stability. TerraUSD, designed to maintain a $1 value through algorithms and incentives tied to LUNA, began losing its peg in May 2021. To stabilize the coin, Tai Mo Shan purchased over $20 million worth of TerraUSD under an agreement with Terraform Labs. The SEC claimed this gave a false impression that TerraUSD’s algorithmic mechanism was functioning as intended.

This firm, between early 2021 and May 2022, underwrote LUNA offerings, further violating the securities laws. The regulator faulted the firm for negligently failing to appreciate that the nature of its conduct deceived investors.

$40B Terraform Crash Means Wider Legal Fallout

The case is part of broader legal challenges stemming from the collapse of Terraform’s ecosystem, which erased $40 billion in investor assets. Terraform Labs had previously agreed to pay $4.5 billion to settle SEC claims related to its downfall.

Tai Mo Shan is mainly owned by Jump Crypto, which was previously criticized for its affiliation with Terraform. The former president of Jump Crypto, Kanav Kariya, also joined the Luna Foundation Guard, which was responsible for overseeing the reserves of TerraUSD. Kariya left Jump Crypto in June.