The SEC has reportedly struck a $123 million deal with Jump Crypto subsidiary Tai Mo Shan. That resolves accusations that TerraUSD was misleading investors about the stability of it before it collapsed.
It represents a major point of stress in the ongoing regulatory scrutiny of the sector. Is this $123 million settlement the beginning of tighter crypto regulation?
Key-Takeaways:
- Tai Mo Shan settled with the SEC over TerraUSD stability claims.
- Settlement indicates the crypto industry is facing up more intense regulation.
- Following the collapse, new regulations were brought in, such as the Lummis-Gillibrand Stablecoin Act, to prevent further crises.
Background of the Settlement
Concerning activities from 2021 were exposed by the Securities and Exchange Commission investigation. That year, Jump Crypto subsidiary Tai Mo Shan reached a special arrangement with Terraform Labs. They were able to purchase LUNA tokens far cheaper as a result of the deal.
The stablecoin’s dollar peg was then maintained by the company investing $20 million in UST tokens. It later would become a centerpiece of the SEC’s investigation into possible market manipulation issues.
Gary Gensler, SEC chair, stressed the blowback from the TerraUSD collapse will hit everyday investors. However, the regulatory body states that the crypto market participants have to follow the case of securities based on laws and regulations. They are, naturally, more concerned with protecting retail investors from being hoodwinked by shifty market practices.
Collapse Timeline of TerraUSD
This stability began unravelling its own network in May 2022, propelling us all on a wild ride into crypto’s dark ages. Once a major holder started to dump $285 million of UST tokens, it triggered the initial destabilisation.
After this, the price was pushed down to almost $0.98, crossing the dollar peg, and managed to sell. The fast couple days took a tumble though, UST falling to $0.67. A change in price caused a forced liquidation across the market.
The whole cryptocurrency ecosystem was shocked when TerraUSD collapsed. This was severe for the market’s confidence in algorithmic stablecoins. It was under the radars of the regulatory bodies around the world.
Future Implications of Regulatory Changes
The TerraUSD disaster directly affected the regulations of new cryptocurrency. The Lummis-Gillibrand Stablecoin Act of 2024 was the result of the crisis. In particular, such a law bans any algorithmic stablecoins to make sure the recurrence of the same doesn’t even happen.
But that settlement with Jump Crypto subsidiary Tai Mo Shan is just one part of a much larger and on-going legal battle. Also, Terraform Labs and its founder, Do Kwon, were investigated by both federal authorities. They all ended with a big $4.4 billion settlement on their lawsuit.
That’s a big step in cleaning up the mess that followed TerraUSD’s collapse. The cryptocurrency industry is all in on stricter regulatory oversight. The market participants have to deliver transparency and abide by the securities laws now.
The case also emphasizes the importance of honesty for cryptocurrency market practice. First of all, companies need to be more open and transparent about the products risks and limitations. The settlement is a reminder to the market that, if the regulator thinks you’re being misleading, the regulator will act.
Conclusion
The $123 million settlement between the SEC and Tai Mo Shan, Jump Crypto subsidiary brings to a close a giant chapter in crypto history. It’s a broader change in how regulatory bodies are thinking about crypto oversight.
How much does the $123 million settlement say about the change in crypto oversight? Let us know what you think.
