Do kwons doom with the Terra Luna ecosystem actually generated $1.28B in profit for a company that was initially unknown to the public, which until recent events when the U.S. regulators sued Do Kwon and Terraform Labs for implosion of terraUSD (UST) stablecoin and related LUNA token. The public was left with many question “Who was the trading partner that booked $1.28 billion in profits before Terra’s $40 billion ecosystem crumbled?”
It was however reported that it was Chicago-based Jump Crypto company that profited before the final collapse of the TerraUSD (UST). Jump Crypto company was able to buy heavily the discounted luna tokens, the assets that supported TerraUSD (UST). The firm spent only $62 million to help Do kwon keep TerraUSD (UST) price near $1 in May 2021, according to the SEC complaint, but earned $1.28 billion by selling off discounted tokens that it had purchased according to the terms of its agreement with Terraform Labs.
This terms of agreement was that “the TerraUSD (UST) would stay pegged to the price of $1 solely as a result of a state-of-the-art “algorithm.” The algorithm was codified in blockchain-based computer code called smart contracts, which was supposed to print and burn luna, UST’s speculative sister token, to serve as a sort of shock absorber for UST’s price.
So when UST stablecoin dropped a few cents off of its $1 peg in May 2021, Terraform framed its eventual recovery as a proof-case for the success of its algorithm, but according to the findings of SEC, “the stablecoin was only actually able to recover as a result of the third party (Jump crypto), which stepped in to covertly buy up Terra’s tokens to backstop the market sell-off”.
According to the U.S. Securities and Exchange Commission’s (SEC) complaint, it was reported that “Jump Crypto was active in the Terra ecosystem, frequently posting governance proposals and heavily invested in the project, including building a Terra cross-chain bridge and co-leading a $1 billion capital raise to seed the Luna Foundation Guard. Jump Crypto President Kanav Kariya also served on the board of the Luna Foundation Guard, which stewarded Terra’s multi-billion-dollar bitcoin reserve treasury. The reserves were depleted in May 2022 in a failed attempt to restore UST’s dollar peg and also siphoned to a Swiss bank account controlled by Kwon”
It was also noted by the SEC that Terraform Labs recruited Jump Crypto trading firm to serve as a market maker for its token ecosystem. Jump Crypto was able to buy luna for as little as 40 cents while it traded for $90 on the open market, according to the terms of their agreement.