Jump Crypto – The Unnamed Firm That Raked In $1.28 Billion from Do Kwon’s Failed Terra Ecosystem

A complaint filed by the SEC against Do Kwon and Terraform Labs has revealed an unnamed trading firm helped Kwon restore the UST’s $1 peg in 2021 in exchange for discounted LUNA tokens.

When U.S. regulators sued Do Kwon and Terraform Labs this week for the spectacular implosion of the terraUSD (UST) stablecoin and related LUNA token, a huge question was left unanswered: What caused Terra’s $40 billion ecosystem to crumble?

Jump Crypto - The Unnamed Firm That Raked In $1.28 Billion from Do Kwon's Failed Terra Ecosystem

According to people familiar with the matter, Jump Crypto, a Chicago-based company, has become a giant in digital assets with deep roots in conventional finance.

A spokesperson for Jump Crypto declined to comment on the news, which was first reported by The Block.

The SEC this week accused Kwon and Terraform of securities fraud and selling unregistered securities that hurt U.S. retail and institutional investors. Within the complaint, there’s reference to an unnamed U.S. trading firm that had an exclusive market-making arrangement with Terraform Labs, the developer of the UST stablecoin. That anonymous firm was not accused of wrongdoing.

Jump Crypto was a driving force in the Terra ecosystem, frequently proposing governance changes and heavily investing in the project, including building a Terra cross-chain bridge and co-leading a $1 billion capital raise to seed the Luna Foundation Guard. Jump Crypto President Kanav Kariya also served on the board of the Luna Foundation Guard, which stewarded Terra’s multi-billion-dollar bitcoin reserve treasury.

In May 2022, the US Treasury’s reserves were depleted in a failed attempt to restore the dollar peg. This depletion also caused a large sum of money to be siphoned into a Swiss bank account controlled by Kwon, according to the SEC complaint.

Terraform Labs said that UST, Terra’s ill-fated “decentralized” stablecoin, would stay pegged to the price of $1 solely as a result of a state-of-the-art “algorithm.” That algorithm – which was codified in blockchain-based computer code called smart contracts – was supposed to print and burn luna, UST’s speculative sister token, to serve as a sort of shock absorber for UST’s price.

However, on Tuesday, Terraform Labs announced that it was abandoning the algorithm in favor of a traditional peg to the US dollar. The decision was made in the wake of UST’s price crashing to just $0.27 on Monday, a far cry from the $1 price it was supposed to maintain. In a blog post, Terraform Labs said that it was making the

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