SEC filings uncover secret agreement between Jump Trading and Terraform Labs

Chicago-based crypto trading firm Jump Trading is again facing scrutiny from the U.S. Securities and Exchange Commission (SEC) as new court filings shed light on a clandestine agreement between the company and the now-defunct Terraform Labs regarding the TerraUSD stablecoin.

These documents confirm that Jump Trading acquired more than 62 million TerraUSD tokens, successfully restoring the stablecoin’s price to its pegged value of $1 following its instability in May 2021.

Jump Trading’s role in TerraUSD’s pre-collapse funding

The SEC filings reveal that a year before the collapse of TerraUSD, Jump Trading made a significant cash injection into the project. This infusion of funds allowed the firm to purchase Luna tokens from Terraform Labs, the company behind TerraUSD, at various prices over three years.

As a result, Jump Trading reportedly reaped $1.28 billion from this arrangement. It is important to note that Jump Trading has not been implicated in any wrongdoing thus far.

Earlier, the SEC had disclosed in its complaint against Terraform Labs and Do Kwon, CEO of Terra and co-creator of Terraform Labs, that an unidentified third party had profited immensely by saving the Terra stablecoin from its impending collapse. Speculation had previously linked Jump Trading as the undisclosed party involved, as crypto.news reported earlier.

The court filings also include a contract dating back to November 2019, outlining a three-year loan agreement between Terraform Labs and Jump subsidiary Tai Mo Shan Limited. Under this agreement, 30 million Luna tokens were loaned, with an annualized interest of 2%, payable in Luna tokens.

Furthermore, an email sent by Kwon to investors was unveiled, where he disclosed Terraform Labs’ “important arrangement” with Jump Trading and requested investors to maintain confidentiality regarding the partnership.

Do Kwon’s legal woes

Do Kwon, the creator of Luna, a crypto token once valued at $116, and TerraUSD, a stablecoin designed to maintain a 1:1 peg with the U.S. dollar, is at the center of controversy. In May 2022, both tokens experienced a significant loss in value, causing a massive $40 billion crash in the cryptocurrency market.

Following the crash, Korean authorities leveled accusations against Kwon and several individuals associated with Terraform Labs, alleging violations of Korean capital markets law and the issuance of fraudulent securities.

In September 2022, a federal court in New York also charged Kwon with conspiracy to commit wire fraud, commodities fraud, and securities fraud.

Currently, Do Kwon is out on bail in Montenegro, awaiting trial on charges about the alleged utilization of a counterfeit Costa Rican passport. The United States and South Korea have initiated extradition proceedings to bring him back to their respective jurisdictions.

Kwon vehemently denies these allegations and asserts that he is not evading authorities, emphasizing his full cooperation with government agencies. He attributes the downfall of his tokens to external factors, such as market volatility and regulatory ambiguity.

Despite the challenges, Kwon has expressed his commitment to restoring the value of Luna and TerraUSD and compensating the investors who suffered losses.

Meanwhile, Jump Crypto, the digital assets trading unit of Jump Trading, reportedly plans to expand its international operations while scaling back its presence in the United States due to mounting regulatory pressures.