Jump’s crypto subsidiary agrees to a $123 million settlement as terraUSD’s fallout continues to sting

TerraUSD is still managing to inflict pain — even from the grave.

The SEC said it’d reached a settlement with Tai Mo Shan, a subsidiary of the investment firm Jump Crypto, regarding its dealings with Terraform Labs. Terraform Labs was the business behind the terraUSD stablecoin, whose 2022 spectacular collapse helped kick off crypto winter. Tai Mo Shan will pay $123 million after the regulator said it misled investors about terraUSD’s stability.

TerraUSD was an “algorithmic stablecoin.” Unlike fully reserved stablecoins, algorithmic stablecoins try to maintain a price peg via financial engineering and a token-arbitrage mechanism. The SEC said Tai Mo Shan secretly propped up terraUSD before it depegged, which wiped out $40 billion in investor value in the process.

The regulator said: “Tai Mo Shan acted negligently by trading UST [terraUSD] in a manner that deceived the market into believing that Terraform’s algorithmic mechanism was working to stabilize UST, when in reality the price was being stabilized, at least in part, by Tai Mo Shan’s large purchases of UST, which were incentivized by Terraform.”

Jump is said to have profited $1.28 billion from its arrangement with Terraform Labs.