By Joy, PANews

For Jump Trading, the traditional high-frequency trading giant in the cryptocurrency circle, the past year has undoubtedly been the year that has encountered the most setbacks since the high-profile launch of Jump Crypto in 2021.

From the cross-chain bridge Wormhole being hacked, to Terra’s death spiral, to the FTX thunderstorm, and the heavily-stocked Solana ecosystem being damaged, Jump Crypto suffered serious financial losses. Recently, Jump Trading was revealed to have withdrawn from the U.S. cryptocurrency trading market due to tightening regulations. In addition, it was subject to a class action lawsuit from Terra investors and was confirmed by the SEC to have made nearly $1.3 billion in profits from Terra transactions.

Class action lawsuit accuses Jump of helping UST recover hook

Following the FTX collapse, U.S. policymakers and regulators increased regulations on the crypto industry. Recently, Bloomberg quoted people familiar with the matter as saying that as regulatory authorities intensify their crackdown on the encryption industry, market makers Jump Trading and Jane Street are withdrawing from the U.S. cryptocurrency trading market. It is reported that the two companies still provide market making services and have not completely abandoned the encryption industry. But Jump Crypto, the digital asset trading arm of Jump Trading, is exiting the U.S. market, but it still plans to expand internationally.

At the same time, a class-action lawsuit against Jump Trading has also pushed it to the forefront of public opinion.

Taewoo Kim, a resident of New Jersey, filed a lawsuit on May 9 on behalf of affected investors, claiming that Jump Trading was an early partner and financial supporter of the collapsed stablecoin project Terraform Labs and believed that it was involved in a fraudulent scheme involving Terra. played a role in causing losses of at least $40 billion to investors who had put their money into related cryptocurrencies.

The lawsuit alleges that beginning in or around November 2019, a series of agreements were negotiated between former Terraform CEO Do Kwon and Jump. This includes Terraform lending 30 million LUNA tokens to Jump, enabling them to provide market making services for LUNA and UST. In return, Jump is purportedly entitled to receive compensation, including receiving LUNA tokens at a heavily discounted price.

In fact, a year before the May 2022 Terra crash, UST once broke its anchor on May 19, 2021, falling 10%. The lawsuit alleges that on May 23 of that year, Kwon and Jump conspired to artificially inflate the prices of UST and aUST, the tokens used on Terra’s lending platform Anchor. Between May 23 and May 27, 2021, Jump Trading bought over 62 million UST tokens. The trades were conducted on multiple cryptocurrency exchanges to conceal Jump’s manipulations. So investors believe that Jump’s actions helped Terra temporarily restore the illusion of UST being pegged to $1.

Kwon also said after the incident that UST’s anchoring illustrates the self-healing ability of their stabilization mechanism and their ability to maintain a stable peg to the U.S. dollar. This incident also made many people think that it was a verification and proof of the strength of the UST mechanism, misleading many investors to trust Terra. But to everyone's surprise, behind this so-called self-repair is actually the manipulation of the organization.

SEC alleges Jump profited nearly $1.3 billion from Terra deal

The U.S. Securities and Exchange Commission (SEC) filed a civil lawsuit against Terraform Labs and Do Kwon in February this year, accusing them of using a "U.S. trading institution" to support the price of UST in May 2021 to mislead investors. Subsequently, The Block reported that Jump Trading was the trading institution charged by the SEC.

Recent SEC court filings in the class action lawsuit allege that Terraform began working with the trading firm around November 2019. The company is compensated for providing market-making services for Luna and UST, and it is often able to obtain Luna at a cost below current market prices. After the exchange stepped in to help shore up UST in May 2021, Terraform and Jump signed an agreement in July 2021 to transfer 61.4 million LUNA to Jump at a fixed price of $0.40 per token. The arrangement will remain in effect for the next four years regardless of LUNA's actual market value, which peaked at $116 on the secondary market, and the SEC said the arrangement netted Jump $1.28 billion. Looking back at the historical market price of LUNA, it is precisely after July 2021 that LUNA began to rise crazily.

It was this deep interest relationship that made Jump continue to increase its investment in Terra. Jump seems to have long realized that it is difficult to maintain the anchoring of UST by relying on LUNA alone. Therefore, in February 2022, it led a US$1 billion financing for the Terra ecological LUNA Foundation Guard (LFG) and proposed to defend the stability of Terra by creating a Bitcoin reserve pool. The value of the currency UST is anchored. But everything was too late, and Terra collapsed rapidly three months later. But even in Terra's perilous moments. Jump was still committed to providing financial support for LFG, but Terra quickly died under the stampede of the spiral before this financing was supposed to be available.

It is worth mentioning that during the FTX thunder incident, insiders pointed out that Alameda and Jump were conspiring to raise Serum's fully diluted valuation (FDV) beyond its actual value to facilitate the use of Serum. Mortgage to obtain more liquidity.

Do Kwon is currently out on bail in Montenegro, where he awaits trial on charges he attempted to use a forged Costa Rican passport. The United States and South Korea are both seeking his extradition. Jump did not respond to requests for comment. According to Bloomberg, Jump Trading’s digital asset trading arm Jump Crypto is planning to expand internationally and exit the U.S. market due to recent increased regulatory pressure.

The Waterloo of Jump and Terra is also the Waterloo of the entire crypto market. The crypto world advocates transparency and decentralization, while insider trading and manipulation by large institutions maintain superficial prosperity. Although it will reap its own consequences one day, it will also leave more ordinary investors footing the bill or even being buried with them.

(The above content is excerpted and reprinted with the authorization of our partner PANews, original text link)

Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.

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