The Commodity Futures Trading Commission is investigating Chicago-based trading firm Jump’s involvement in cryptocurrencies, including an investigation into the firm’s trading and investment activities, according to a person familiar with the matter.
The investigation, which found no evidence of wrongdoing, comes after a tumultuous three years for Jump. The company is known for its expertise in algorithmic trading and was one of the cryptocurrency industry’s most active market makers and investors before it was recently implicated in a series of alleged hacks and collapses. Jump has since scaled back its cryptocurrency efforts, including Spin-off The firm has discontinued two of its high-profile projects and withdrawn from the spot Bitcoin ETF race.
Representatives for the CFTC and Jump declined to comment.
Trade woes
Jump has long been known as one of the top players in the secretive world of high-frequency trading. In September 2021, the company Announcement The company had been quietly operating in the cryptocurrency space for several years, but the president of its division, Jump Crypto, stepped down. Jump appointed Kanaf Kariya, a former intern who was in his mid-20s at the time, as president of the team, giving him one of the industry’s most high-profile roles.
Jump played a key role in the emerging sector, acting as a top market maker across exchanges and often working with crypto projects to provide liquidity for newly released tokens. The company has also become one of the top venture investors in the space, establishing an incubation and engineering division to help develop leading projects such as Wormhole, Pyth, and Firedancer.
But cracks soon began to appear in Jump’s phenomenal business. Wormhole’s $325 million hackis a decentralized finance platform conceived as a bridge between different blockchains. Jump quickly plugged holes and demonstrated the depth of its balance sheet. After the collapse of FTX in late 2022, it quickly became clear that Jump was acting as the exchange’s top market maker. Loss According to Michael Lewis’ book, about $300 million. It continues forever.
Jump was embroiled in controversy again at the SEC’s February 2023 meeting. Litigation The SEC filed suit against TerraForm Labs, the developer of the failed stablecoin TerraUSD, and its founder Do Kwon. In the complaint, the SEC alleged that a US exchange had secretly propped up Terra’s peg, which was on the verge of collapse in 2021. Documents to be submitted—Exposed The company is called Jump. The SEC accused Terraform and Kwon of fraud when they publicly claimed the pegs healed naturally, but did not bring charges against Jump. In a trial this spring, former Jump employee Whistleblower The SEC jury Double-sided I signed with an agency in April.
In March 2023, the Department of Justice submitted The criminal case against Kwon. As with the previous SEC lawsuit, the complaint names Jump as a “U.S.-based proprietary trading firm” that helped maintain Terra’s peg, but again, there are no allegations of wrongdoing or charges against the company. Kwon’s lawyers did not respond to requests for comment.
The CFTC’s investigation into Jump’s cryptocurrency business reflects the latest investigation by a federal agency, but it’s unclear whether the agency is considering filing charges against the company. And while the SEC oversees securities, much of Jump’s activity in the derivatives space, from crypto products to traditional instruments, falls under the CFTC’s jurisdiction. Speaking at the Milken Conference in May, CFTC Chairman Rostin Behnam said: Said Cryptocurrency companies will see a “new cycle of enforcement actions.”
The regulator regularly conducts fact-finding investigations into companies under its jurisdiction. luck The SEC has reportedly sent subpoenas to cryptocurrency companies regarding transactions with the Ethereum Foundation, but no charges have been filed yet.
