The U.S. Securities and Exchange Commission (SEC) has charged Jump Crypto's subsidiary Tai Mo Shan Limited with a $123 million penalty for manipulating the TerraUSD (UST) stablecoin price in 2021.
According to the SEC's charges, Tai Mo Shan misled investors by purchasing over $20 million worth of UST tokens when the stablecoin lost its $1 peg in May 2021. The company's intervention created a false impression that UST's algorithmic mechanism was solely responsible for maintaining the token's stability.
The SEC revealed that Terraform Labs, UST's creator, had enlisted Tai Mo Shan to help restore the peg while publicly claiming the stability was achieved through technical mechanisms alone. As part of the arrangement, Tai Mo Shan received incentives including discounted LUNA tokens after UST stabilized.
The $123 million settlement breaks down into three components:
- $73.4 million in disgorgement
- $12.9 million in prejudgment interest
- $36.7 million as a civil penalty
"This case demonstrates how crypto market participants deceived the public," said SEC Chair Gary Gensler, emphasizing the need for compliance with securities laws.
The SEC also charged Tai Mo Shan with acting as an unregistered securities dealer by obtaining LUNA tokens from Terraform Labs and quickly selling them into the U.S. market.
While agreeing to the settlement, Tai Mo Shan neither admitted nor denied the SEC's findings. The firm has committed to cease any further violations of registration and fraud provisions.
This enforcement action follows the broader collapse of the Terra ecosystem in May 2022, which erased over $40 billion in investor value and led to separate charges against Terraform Labs and its founder Do Kwon.