- Tai Mo Shan Ltd. pays $123 million for misleading TerraUSD investors.
- SEC underscores crypto market compliance and investor protection.
The U.S. Securities and Exchange Commission (SEC) has fined Tai Mo Shan Ltd., a subsidiary of Jump Crypto, $123 million for misleading investors about TerraUSD’s stability. TerraUSD, an algorithmic stablecoin issued by Terraform Labs, collapsed in May 2022, wiping out $40 billion in investor assets.
Tai Mo Shan’s actions during TerraUSD’s collapse have drawn severe scrutiny. The SEC accused the company of purchasing $20 million worth of TerraUSD to falsely stabilize its $1 peg. These trades gave the impression that the stablecoin’s algorithmic mechanisms function properly, deceiving the market.
The SEC also alleged Tai Mo Shan’s involvement in unregistered securities offerings. It underwrote TerraUSD’s sister token, Luna, which the regulator considers a security. From early 2021 to May 2022, the company profited from these transactions and supported Terraform’s ecosystem.
Settlement and Regulatory Fallout
According to the SEC, Tai Mo Shan’s trading created a false sense of stability during a critical period. The regulator emphasized that the firm should have known these actions misled investors. SEC Chair Gary Gensler highlighted the case as another example of significant investor losses caused by fraud in crypto markets.
Tai Mo Shan agreed to settle without admitting or denying the allegations. The settlement includes $73.5 million in disgorgement, $12.9 million in prejudgment interest, and $36.7 million in civil penalties. The company has also agreed to cease further violations of U.S. securities laws.
According to court filings, the firm reaped over $1 billion in profits from its involvement. Kanav Kariya, the former head of Jump Crypto, resigned in June 2024 amid regulatory investigations. The collapse of TerraUSD and Luna remains one of the crypto industry’s most infamous disasters.
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