Reportedly, Jump Crypto is the unnamed U.S. trading firm that had an exclusive deal with Terraform Labs taking away $1.28 billion in profits, as per the SEC’s complaint against Do Kwon and Terra.
Two days back, SEC sued Terraform Labs & Do Kwon for touting and marketing TerraUSD (UST) as a “yield-bearing” stablecoin. The lawsuit mentions a third party who took away a lot of profits from the Terra ecosystem.
The lawsuit asserts that Kwon misrepresented the UST algorithm’s role in helping Terra regain its peg with the U.S. dollar after losing it during a crash in May 2021, a year before Terra’s collapse.
Kwon “secretly discussed plans with a third party,” to purchase a sizable chunk of UST in order to raise its price, the SEC claims. Nonetheless, Kwon boasted that there had been no human interference subsequently.
According to the SEC complaint, the company spent only $62 million to keep the price of UST close to $1 in May 2021 but made $1.28 billion by selling off discounted tokens that it had bought in accordance with its contract with Terraform Labs.
As per the terms of the contract, Jump Crypto was occasionally able to purchase LUNA for 40 cents when it was trading for $90 on the open market in exchange for market making, according to the SEC.
The SEC claims that after this incident, Terra changed its deal with the company, reducing the requirements it had to meet in order to acquire discounted tokens.
Jump Crypto has not yet been charged by the SEC or accused of participating in illegal activities. The company still hasn’t responded to these allegations.