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CryptoIntelligence 2024-12-22 14:25:00

Tai Mo Shan Settles with SEC for $123 Million Over TerraUSD Collapse

Tai Mo Shan, a subsidiary of Jump Crypto, agreed to pay $123 million to settle charges with the United States Securities and Exchange Commission (SEC) on Dec. 20 for misleading investors about the stability of the TerraUSD (UST) algorithmic stablecoin before its collapse. The SEC revealed that Tai Mo Shan had an agreement with Terraform Labs in 2021 to purchase Terra LUNA at a steep discount. Additionally, Tai Mo Shan bought approximately $20 million in UST to maintain the stablecoin’s 1:1 peg with the US dollar. SEC Chair Gary Gensler remarked: “The impact reverberated throughout the crypto markets, eventually costing the savings of countless investors. Regardless of the labels, crypto market participants should comply with the securities laws where applicable and not deceive the public.” The Collapse of TerraUSD TerraUSD, once the third-largest stablecoin by market capitalization, collapsed in May 2022, causing widespread disruption in the crypto market. It was an algorithmic stablecoin that maintained its dollar peg through software and digital asset collateral. The collapse began on May 8, 2022, when a whale dumped around $285 million in UST, causing the stablecoin to lose its peg and drop to $0.98. By May 10, UST plunged further to $0.67, triggering liquidations among leveraged traders and sparking fear and uncertainty among investors. As UST’s market capitalization exceeded the underlying LUNA reserves, it became clear that the stablecoin lacked sufficient collateral, leading to its complete collapse as panic selling ensued. The fallout prompted a formal investigation of Terraform Labs and its founder, Do Kwon, by U.S. authorities, resulting in charges and a $4.4 billion settlement. The collapse also spurred regulatory reforms like the Lummis-Gillibrand Stablecoin Act of 2024, which banned algorithmic stablecoins.

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