Markets
CFTC Launches Jump Trading Investigation as Crypto Scrutiny Increases
The Commodity Futures Trading Commission (CFTC) has launched an investigation into Jump Trading, a major Chicago-based company known for its significant role in the cryptocurrency industry. This investigation, while not indicating any wrongdoing, focuses on Jump’s activities in crypto trading and investing.
Jump Trading Faces Regulatory Hurdles
The Commodity Futures Trading Commission is examining Jump’s role in the cryptocurrency industry, investigating its trading and investment activities, such as reported by Fortune.
This investigation, which does not involve any wrongdoing, follows a tumultuous three years for Jump. Known for its dominance in algorithmic trading, Jump had become a major player in the crypto markets but faced challenges after being linked to various cyber incidents and market downturns.
Jump subsequently scaled back its crypto operations, including divesting two major projects and staying out of the race to launch a Spot Bitcoin ETF.
The company has faced significant setbacks, starting with a $325 million hack on Wormhole, a decentralized finance (DeFi) platform focused on linking different blockchains. Moreover, after FTX collapsed in November 2022, it was revealed that Jump had suffered losses of nearly $300 million as the primary market maker on the defunct crypto exchange.
Adding to the controversy, Jump once again found itself in controversy during the SEC’s February 2023 lawsuit against Terraform Labs and its founder, Do Kwon, the creator of the failed TerraUSD stablecoin. The SEC alleged in its complaint that a U.S. trading company secretly backed Terra Anchor during a near collapse in 2021, with later reports identifying the company as Jump.
While the SEC charged Terraform and Kwon with fraud for misleadingly claiming natural stake restoration, no charges were filed against Jump.
In March 2023, the Ministry of Justice opened criminal proceedings against Kwon. Similar to the SEC’s lawsuit, the complaint referred to Jump as a “U.S.-based proprietary trading company” involved in maintaining Terra’s peg, but did not allege any wrongdoing or charge accusations against the company.
SEC and CFTC Take Lead in Enforcement Actions
Over the past few years, the CFTC and its counterpart, the U.S. Securities and Exchange Commission (SEC), have increased their efforts to pursue legal action against entities in the cryptocurrency industry. In recent times, they have launched several enforcement measures targeting crypto companies such as Binance and FTX.
The CFTC’s investigation into Jump’s crypto operations is the most recent investigation by a federal agency, although it is unclear whether charges are being considered. Unlike the SEC, which regulates securities, the CFTC oversees much of Jump’s derivatives business, from crypto assets to traditional commodities.
CFTC Chairman Rostin Behnam hinted at possible enforcement actions to come during his speech at the Milken Conference in May, indicating that cryptocurrency companies should expect another round of regulatory scrutiny.
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