The SEC has charged Tai Mo Shan Limited, a subsidiary of Jump Crypto Holdings LLC, with misleading investors about Terra USD's stability and selling unregistered securities. Terra USD, a stablecoin intended to maintain a $1 peg, lost its stability in May 2021. Tai Mo Shan intervened by making $20 million in trades to temporarily stabilize the price. However, the company concealed an agreement with Terraform Labs, wherein they stabilized UST in exchange for discounted LUNA tokens, misleading investors about the algorithm's role.
From January 2021 to May 2022, Tai Mo Shan acquired and resold LUNA tokens on U.S. exchanges, which the SEC classifies as unregistered securities. By acting as an unregistered statutory underwriter, the company violated securities laws. Tai Mo Shan agreed to pay over $123 million in fines and penalties under a cease-and-desist order but did not admit wrongdoing.
The case underscores the fragility of crypto systems and the reliance on trust. The SEC, led by outgoing Chair Gary Gensler, emphasizes the importance of investor protection amid calls for stricter regulations. The Terra collapse serves as a cautionary tale, spotlighting the need for greater oversight in the evolving crypto industry.