On December 20, 2024, the SEC announced a $123 million settlement with Tai Mo Shan, a subsidiary of Jump Crypto. The firm was accused of misleading investors about the stability of the TerraUSD (UST) stablecoin prior to its collapse.

In 2021, Tai Mo Shan entered into a deal with Terraform Labs, securing significant discounts on Terra (LUNA) tokens. According to the SEC, the company resold these tokens to investors, promoting high-risk assets.

In exchange for the discount, Tai Mo Shan invested $20 million to support UST’s peg to the US dollar, creating what the SEC described as a false impression of stability.

SEC Chair Gary Gensler emphasized that UST’s collapse was a blow to the entire crypto market, harming numerous investors. He reiterated the obligation of crypto companies to comply with securities laws and ensure transparency.

“This case reminds us that, far too often in the crypto market, we have seen significant investor losses due to fraud,” Gensler said.

The collapse of TerraUSD in May 2022 sent shockwaves through the industry and marked the onset of the “crypto winter.” The stablecoin lost its dollar peg after a $285 million sell-off, triggering a cascade of liquidations and a price drop to $0.67.

These events prompted an investigation into Terraform Labs’ activities. The company and its founder, Do Kwon, faced fraud charges and subsequently paid $4.47 billion in settlements with U.S. authorities.

UST’s collapse also heightened regulatory scrutiny of the digital asset industry. For example, U.S. lawmakers introduced a bill to ban algorithmic stablecoins. Known as the Lummis-Gillibrand Stablecoin Act of 2024, the legislation aims to tighten regulations on such assets.