Breaking News: CFTC Launches Probe into Trading Practices of Jump Crypto
By Hassan Shittu
Updated: June 20, 2024, 14:59 EDT
The Commodity Futures Trading Commission (CFTC) has initiated an investigation into the trading practices of Jump Crypto, a major player in both traditional and cryptocurrency markets. This move comes as regulatory measures in the crypto space are tightening.
Jump Crypto, the crypto division of Jump Trading, is known for its advanced algorithmic trading and market-making capabilities. It has been instrumental in providing liquidity and supporting the development of new crypto projects. However, due to significant financial losses and involvement in controversial legal cases, regulatory authorities have turned their attention to the company.
The turbulent years experienced by Jump Crypto may have attracted the attention of the CFTC. Despite being active in the crypto space for several years, the firm officially announced its crypto division, Jump Crypto, in September 2021. Since then, it has become a prominent market maker across various exchanges and has played a crucial role in providing liquidity for new crypto tokens. Additionally, Jump Crypto has made significant investments in projects like Wormhole, Pyth, and Firedancer.
Sources familiar with the matter have revealed that the CFTC is investigating Jump Crypto for its activities in the cryptocurrency market. This investigation follows a series of challenging years for Jump, marked by high-profile incidents and substantial financial setbacks.
In early 2022, Jump Trading faced a $325 million loss due to its involvement in the Wormhole platform hack. However, the firm demonstrated resilience by quickly covering these losses. Later in the same year, Jump suffered another significant setback when the collapse of FTX resulted in a loss of nearly $300 million for the company. These events were extensively detailed in Michael Lewis’s book “Going Infinite.”
The Securities and Exchange Commission (SEC) also launched an investigation into Jump Crypto in November of the previous year. The SEC alleged that the firm had secretly purchased large amounts of UST to stabilize its value, profiting over $1 billion in the process. The investigation further revealed that Jump Crypto received favorable terms on LUNA loans, which were made shortly after UST and LUNA experienced destabilization in May 2021.
Another controversy arose during the SEC’s lawsuit against Terraform Labs and its founder, Do Kwon, in February 2023. The SEC accused Jump Trading of propping up Terra’s peg during a near-collapse in 2021. However, no charges were filed against Jump, and the SEC’s complaint primarily focused on Terraform Labs and Kwon for fraudulently claiming that the peg had naturally been restored.
In March 2023, the Justice Department filed criminal charges against Kwon, mentioning Jump Trading as a firm that helped maintain Terra’s peg. However, no wrongdoing on the part of Jump was alleged.
The CFTC’s investigation into Jump Crypto’s cryptocurrency activities is the latest instance of federal scrutiny faced by the firm. The agency’s focus is primarily on Jump’s derivatives trading activities, which encompass both crypto products and traditional commodities.
CFTC Chair Rostin Behnam, speaking at the Milken Conference in May, hinted that cryptocurrency firms should expect “another cycle of enforcement actions.” This aligns with the agency’s current emphasis on Jump’s trading practices.
It is important to note that regulatory agencies like the CFTC and the SEC routinely conduct investigations to gather information about companies within their jurisdiction. The CFTC’s investigation into Jump Crypto is part of these efforts and should not be seen as evidence of any wrongdoing.
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