- Jump subsidiary Tai Mo Shan Limited has agreed to a cease-and-desist order over alleged violations in unregistered securities offerings
- The SEC has ordered the company to pay over $120 million in disgorgement, interest, and penalties
- The case revolves around the trading and promotion of Terraform Labs’ crypto assets LUNA and UST during their market collapse
The Securities and Exchange Commission (SEC) has imposed a cease-and-desist order on Jump subsidiary Tai Mo Shan Limited, alleging violations of securities laws linked to Terraform Labs’ crypto assets, LUNA and UST. The company has agreed to pay over $120 million in penalties for its role in unregistered securities trading and market manipulation. The SEC claims Tai Mo Shan misled the market during UST’s de-pegging from the US dollar in 2021.
LUNA Collapse Still Haunting Market
The SEC’s investigation revealed that Tai Mo Shan acted as a statutory underwriter for Terraform Labs’ crypto assets without proper registration. From January 2021 to May 2022, Tai Mo Shan offered and sold LUNA on US-based platforms, profiting significantly from the transactions.
“Tai Mo Shan directly or indirectly offered and sold securities through interstate commerce when no registration statement was in effect,” the SEC stated in its filing. The firm also engaged in a trading strategy that added to the circulating supply of LUNA, violating Sections 5(a) and 5(c) of the Securities Act.
Deceptive Conduct During UST Collapse
The SEC alleged that during UST’s de-pegging in May 2021, Tai Mo Shan entered into an agreement with Terraform Labs to support UST’s price, purchasing over $20 million of UST, creating a false impression that Terraform’s algorithm was effectively stabilizing its price.
“Tai Mo Shan should have known that purchasing UST in this manner misled the market about the stability of UST’s peg and the effectiveness of Terraform’s algorithm,” the SEC claimed.
Tai Mo Shan has been ordered to pay $73.5 million in disgorgement, $12.9 million in interest, and a $36.7 million civil penalty. These funds will be distributed to harmed investors. Legal experts believe this case underscores the need for greater oversight of crypto markets.
