Jump Trading earned more than $1 billion for supporting the TerraUSD token rate
Jump Trading has earned more than $1 billion for supporting the UST stablecoin exchange rate under a deal with Do Kwon's Terraform Labs
The trading company struck a secret deal with Do Kwon's Terraform Labs and supported the UST's peg to the May 2021 dollar exchange rate
U.S. trading company Jump Trading struck a secret deal with Terraform Labs to support the TerraUSD (UST) stablecoin a year before it collapsed, Fortune reports, citing court documents. They allege that Jump Trading made $1.28 billion from its deals with Do Kwon.
The collapse of TerraUSD and Luna coins in May 2022 led to a total loss of about $40 billion by thousands of cryptocurrency investors. Earlier, it was known that Jump Trading was involved in an investigation by U.S. authorities into the fraud of Terraform Labs and its founder Do Kwon.
The U.S. Securities and Exchange Commission (SEC) released new documents on the case, saying that it was Jump Trading that backed the collapsed UST algorithmic stack coin in May 2021, when it lost its peg to the U.S. dollar. Jump bought more than 62 million tokens, which pushed the coin's price back to $1. Do Kwon later call the price recovery proof of UST's "self-recovery" and its ability to maintain a peg to the dollar through an algorithmic mechanism?
The SEC also published a letter Do Kwon sent to Terraform Labs investors about an "important agreement we made with Jump Trading" and asked them to keep it confidential.
The email said that Jump Trading would improve the liquidity of UST and Luna tokens and would be rewarded with options to buy Luna at prices of $0.30, $0.40, and $0.50 for three years. At the time Do Kwon's email was sent, Luna was trading at about $0.20, but it had risen above $90 by the end of 2021. The deals with Terraform Labs brought Jump Trading $1.28 billion.
Lawyers for Do Kwon asked the judge to dismiss the SEC's lawsuit against Terraform Labs and its founder, arguing that the agency lacked jurisdiction to bring the case. The lawyers also argued that Jump Trading's actions were not the sole cause of TerraUSD's May 2021 recovery. They cited data showing that the firm's purchases accounted for only 6 percent of the total transactions that helped restore TerraUSD's bindings at the time.
In the U.S., Do Kwon is charged with eight counts, including conspiracy to defraud, securities fraud, and conspiracy to manipulate the market. U.S. authorities, like the South Korean government, are seeking his extradition from Montenegro, where Do Kwon is accused of document fraud.
On May 12, a court in Montenegro allowed Do Kwon, who has been in custody since his arrest in late March, to be released on €400,000 bail and await trial under house arrest. An extradition decision can only be made after the trial in Podgorica and Do Kwon has served his sentence if it is ordered by a local court.