Jump Crypto profited from Terra Luna as investors lost billions

by Arthur · February 20, 2023

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

Do Kwon faces civil charges in the United States. 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 a market value of over $40 billion. Today there are barely millions. The governing token and stablecoin at the center of that empire is worth less than one cent.

Still, sources told reporters that the crypto arm of Chicago-based trading firm Jump Trading made billions in profits from Terra Luna. Jump Crypto was also closely associated with Sam Bankman-Fried and his favorite blockchain, Solana. Jump Crypto bailed out the Solana-Ethereum bridge, Wormhole, within hours of the $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 been running market-making and quantitative trading operations for decades, it recently began proprietary crypto trading after the 2017 ICO boom.

Jump Crypto makes big money while Terra destroys livelihoods

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

The SEC claims that Terraforms Labs failed to provide investors with information about the staggering risks of its tokens and properties. In May 2022, the 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 linked to US stocks, according to the commission.

The SEC further claims that Terraform Labs marketed these tokens with attractive returns. Statements from marketing materials show how Kwon and Terraform Labs passed the Howey test, a four-pronged Supreme Court test for securities offerings. For example, Kwon designated the UST as pegged to the US dollar and advertised the interest income potential of the UST through its associated Anchor Protocol.

Do Kwon is on the run

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

Alright, I’ll arrange a meeting/conference soon to get over this undercover bs

Police from all over the world are welcome to participate

— Do Kwon 🌕 (@stablekwon) 3 November 2022

Do Kwon mocks law enforcement.

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

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

Do Kwon attempted to rebuild UST and Luna and restore UST’s stick. 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 bitcoins from Terraform Labs’ ecosystem and exchanged the bitcoins for cash using a bank in Switzerland. An SEC court filing explains that Kwon may have withdrew more than $100 million from the Swiss bank account since June 2022.

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