- The latest court filing by the SEC has revealed a secret deal between Jump Trading and Terraform Labs in 2021.
- The high-frequency trading firm reportedly made over $1 billion by propping up TerraUSD after it lost its dollar peg in May 2021.
The U.S. Securities and Exchange Commission has taken aim at Jump Trading with its latest filing in the U.S. District Court for the Southern District of New York. The securities regulator has highlighted an alleged deal between the Chicago based high-frequency quantitative trading firm and Do Kwon’s Terraform Labs, which involved manipulation of the TerraUSD [UST] stablecoin.
Jump Trading helped TerraUSD recover in 2021
As per a report by the Wall Street Journal, the court filings made by the Securities and Exchange Commission last week revealed that Jump Trading entered a secret deal with Terraform Labs after the latter’s TerraUSD stablecoin lost its peg to the US Dollar and dropped below the $1 mark in May 2021. Following the de-pegging, Jump Trading agreed to purchase massive amounts of UST in order to pump its price and restore the dollar peg.
After UST regained its peg, Do Kwon and Terraform Labs touted their stablecoin’s underlying algorithm, which displayed “self-heal(ing)” characteristics. Kwon did not disclose to investors the role that Jump Trading played in propping up his TerraUSD stablecoin.
As part of this secret deal, Do Kwon’s firm allowed the trading firm to purchase its LUNA token for as low as 30 cents when it was trading at well over $10. According to the SEC, Jump Trading made more than $1 billion from its business dealings with Terraform Labs.
The SEC’s filing confirmed rumors about Jump Trading’s proximity to Do Kwon and its involvement in Terraform Labs’ operations before it crashed in May last year. Lawyers representing Terraform Labs and Kwon have asked the court to dismiss the regulator’s lawsuit, citing an overreach of jurisdiction.
The lawyers also argued that the transactions arising from Terra’s secret deal with Jump Trading accounted for 6% of the total UST purchases that contributed to the stablecoin’s re-peg.
