SEC Charges Tai Mo Shan $123M Over Terra Stablecoin Collapse
The U.S. Securities and Exchange Commission (SEC) has fined Tai Mo Shan Ltd., a subsidiary of Jump Crypto Holdings, $123 million for its role in Terra’s algorithmic stablecoin collapse. Tai Mo Shan was accused of misleading investors by artificially stabilizing Terra’s stablecoin, terrausd (UST), during its failed attempt to maintain a $1 peg.
According to the SEC, Tai Mo Shan purchased over $20 million worth of UST on days when the stablecoin’s value fell below $1. These transactions, the SEC alleged, created an illusion that UST’s algorithmic mechanisms were independently functioning to stabilize its price. The firm’s actions were reportedly incentivized by Terraform Labs, which offered discounted options for Luna, UST’s sister token.
SEC Allegations and Settlement Breakdown
The SEC’s complaint also accuses Tai Mo Shan of securities violations in its underwriting and sale of Luna tokens. As a statutory underwriter, the firm acquired Luna from Terraform Labs and sold it on U.S.-based crypto platforms between January 2021 and May 2022, breaching securities laws.
The fallout from UST’s collapse in May 2022, a pivotal event during the “crypto winter,” led to catastrophic losses across the cryptocurrency sector. Terraform Labs and its founder, Do Kwon, were previously held accountable for fraud, culminating in a $4.5 billion settlement with defrauded investors earlier this year.
Without admitting or denying the SEC’s findings, Tai Mo Shan agreed to:
- Pay $73.5 million in disgorgement.
- Pay $12.9 million in prejudgment interest.
- Pay a $36.7 million civil penalty.
- Commit to refraining from further violations of U.S. securities laws.
Implications for the Crypto Industry
SEC Chair Gary Gensler underscored the gravity of the case, stating, “The impact of these deceptive practices reverberated throughout the crypto markets, costing countless investors their savings.”
This settlement marks a pivotal moment as the SEC tightens its scrutiny of crypto firms, especially amid discussions on regulatory oversight. With Gary Gensler stepping down this year, the incoming administration’s approach could reshape the future of cryptocurrency regulations in the U.S.
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