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Do Kwon, the co-founder of Terraform Labs, is at the center of a legal storm as new revelations regarding the terraUSD (UST) stablecoin collapse in 2022 come to light.<\/p>\n
Kwon is under investigation, with recent developments indicating that the involvement of market maker Jump Trading could be crucial in the legal proceedings.<\/p>\n
Following the collapse<\/a> of the UST stablecoin in May 2022, Kwon was sued by the U.S. Securities and Exchange Commission (SEC) for allegedly providing false information to investors.<\/p>\n An Oct. 18 filing<\/a> in a New York court has shed light on the possible significance of Jump Trading LLC in the case. The market maker reportedly made substantial profits, totaling $1.28 billion, during the turbulent period when the terraUSD ecosystem was unraveling.<\/p>\n The focus on Jump Trading arises from an incident a year prior when UST temporarily lost its peg to the U.S. dollar. Kwon had assured investors that the stablecoin maintained its $1 value due to its automated algorithm. However, experts from the SEC contend that Jump Trading played a critical role in stabilizing the coin\u2019s value at Terraform Labs\u2019 request.<\/p>\n The filing stated, \u201cThe peg instead recovered because Defendants entered an arrangement with a U.S. trading firm, Jump Trading LLC (\u201cJump\u201d), to purchase substantial amounts of UST to support the price.\u201d<\/p>\n<\/blockquote>\n In response to these allegations, Kwon\u2019s legal team denied any wrongdoing, asserting that Jump Trading\u2019s trades in terraUSD were not responsible for the peg restoration in May 2021. They further claimed that the de-pegging of UST in May 2022 resulted from an intentional effort by third parties to short the stablecoin, causing it to deviate from its $1 price. Kwon\u2019s team argued that this de-pegging<\/a> incident involved a direct, public intervention in combating the short positions.<\/p>\n Kwon\u2019s defense team has also argued that the SEC lacks jurisdiction in this case because the assets involved, namely cryptocurrencies like UST, are currencies and not securities. This argument highlights a legal gray area that has been a point of contention in the SEC\u2019s cases against cryptocurrency exchanges like Binance and Coinbase.<\/p>\n Meanwhile, Kwon was arrested in March for possessing false identification documents and is currently under house arrest after a request for his release on bail was reapproved<\/a> by a Montenegrian basic court.<\/p>\n\n
Kwon\u2019s Legal Team Denies Market Maker\u2019s Role<\/h2>\n
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