Jump Crypto profited from Terra Luna as investors lost billions

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Sources familiar with the Securities and Exchange Commission’s (SEC) lawsuit against Do Kwon have named Jump Crypto as the beneficiary of $1.28 billion dollars in profit from his decimated crypto empire, Terra Luna.

Do Kwon is facing civil charges in the US. The SEC alleges that he and his company, Terraform Labs, raised billions of dollars through unregistered securities. 

At its peak, Terra Luna’s ecosystem claimed mark-to-market capitalization in excess of $40 billion. Today, it’s barely millions. The governance token and stablecoin at the center of that empire are worth less than one cent.

Nevertheless, sources told reporters that the crypto arm of Chicago-based trading firm Jump Trading earned billion-dollar profits from Terra Luna. Jump Crypto was also closely tied to Sam Bankman-Fried and his favorite blockchain, Solana. Jump Crypto bailed out the Solana-Ethereum bridge, Wormhole, within hours of its $300+ million hack.

Read more: Jump Crypto ties to FTX and Solana put Robinhood users at risk

Jump is a decabillion-dollar institution in Chicago. Although it has operated market-making and quantitative trading operations for decades, it only recently began proprietary crypto trading after the ICO boom of 2017.

Jump Crypto makes big profit while Terra destroys livelihoods

Kwon and Terraforms Labs harmed investors. Well-connected insiders like Jump Crypto are benefiting while regular investors have lost billions.

The SEC alleges that Terraforms Labs failed to provide investors with information about the staggering risks of its tokens and properties. In May 2022, UST lost its peg to the dollar and collapsed. Not only did UST, LUNA, and MIR directly cause tens of billions in losses, their demise rippled across the industry, triggering a cascade of bankruptcies for other digital asset organizations.

The SEC has classified Terraform Labs’ sale of governance token LUNA and stablecoin Terra USD (UST) as illegal securities offerings. Similarly, Terraform Labs’ Mirror Protocol illegally marketed MIR and mAssets as pegged to US equities, according to the commission.

The SEC further alleges that Terraform Labs marketed these tokens with attractive returns. Statements from marketing materials showcase how Kwon and Terraform Labs passed the Howey Test, a four-prong Supreme Court test for securities offerings. For example, Kwon touted UST as pegged to the US dollar and advertised the interest-earning potential of UST through his affiliated Anchor Protocol.

Do Kwon is on the run

Do Kwon has been a fugitive since UST and LUNA collapsed. South Korea issued a warrant for his arrest and revoked his passport. Since then, he has fled to Singapore. Authorities believe he is hiding somewhere like Serbia, where he was spotted at the end of last year, or elsewhere in Europe. He surfaced long enough to taunt law enforcement authorities with an offer for a meeting.

Do Kwon taunts law enforcement.

Read more: Terra founder Do Kwon ordered to comply with SEC subpoena

He retweeted a few things in December 2022 in a vain attempt to demonstrate that Terra 2.0 and LUNA 2.0 are still alive. He also tweeted a link to a New York Times article accusing Sam Bankman-Fried’s companies of market manipulation, heavily implying that Bankman-Fried personally manipulated UST. Since then, his Twitter account has gone inactive.

Do Kwon attempted to rebuild UST and Luna and recover UST’s peg. He launched so-called Terra 2.0 as a reboot of UST. That initiative flopped within hours.

The SEC alleges that Kwon removed 10,000 bitcoin from the Terraform Labs ecosystem and swapped the bitcoin for cash using a bank in Switzerland. An SEC court filing explains that Kwon might have withdrawn more than $100 million from the Swiss bank account since June 2022.

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