The CFTC is investigating Jump Crypto

The Commodity Futures Trading Commission is investigating Chicago-based trading firm Jump’s involvement in crypto, including investigations into its trading and investment activities, according to a person familiar with the matter.

The investigation, which is not evidence of wrongdoing, comes after three turbulent years for Jump. The company is known for its expertise in algorithmic trading and, more recently, as one of the most active market makers and investors in the crypto industry before being implicated in a series of hacks and meltdowns. Jump has since scaled back its crypto efforts, including spinning two of his high-profile projects and deactivating of the Bitcoin ETF spot race.

Representatives for the CFTC and Jump declined to comment.

Business problems

Jump has been known for years as a major player in the secretive world of high-frequency trading. In September 2021, it hit the headlines with the public announcement from its crypto division, Jump Crypto, although the company had been quietly active in the space for several years. Jump named Kanav Kariya, a former intern in his early twenties, as president of the team, catapulting him into one of the industry’s most high-profile roles.

Jump played a key role in the nascent sector, acting as a major market maker on exchanges, often working with crypto projects to provide liquidity for their newly launched tokens. The company also became one of the leading venture capitalists in the sector, as well as creating an incubation and engineering arm that helped develop leading projects including Worm holePyth and Firedancer.

However, cracks soon began to appear in Jump’s prodigious operation, including the $325 million Wormhole hack, a decentralized finance platform designed as a bridge between different blockchains. Jump quickly plugged the hole, illustrating the depth of his swing. Following the collapse of FTX in late 2021, it was soon revealed that Jump served as one of the main market makers on the exchange, losing almost US$300 million, according to the book Going Infinite, by Michael Lewis.

Jump again became embroiled in controversy during the February 2023 SEC meeting lawsuit against Terraform Labs and its founder Do Kwon, who created the failed TerraUSD stablecoin. In its complaint, the SEC alleged that a U.S. trading company had secretly propped up Earth Parity in a near-collapse in 2021. News Reports — and Subsequent filings–revealed the company as Jump. The SEC accused Terraform and Kwon of fraud after they publicly claimed that indexing had been restored naturally, but did not bring charges against Jump. After a trial this spring that included testimony from a former Jump employee who served as Whistleblower for the SEC, a jury side with the agency in April.

In March 2023, the Department of Justice filed a criminal case against Kwon. Like the SEC’s previous lawsuit, the complaint named Jump as a “proprietary U.S.-based commercial company” that helped maintain Earth’s stability, but once again, it did not allege any wrongdoing or bring any charges against the company. . An attorney for Kwon did not respond to a request for comment.

The CFTC’s investigation into Jump’s crypto business mirrors the latest investigation by a federal agency, although it was not known whether the agency is considering any charges against the company. Unlike the SEC, which oversees securities, much of Jump’s activity in the derivatives space, from crypto products to traditional commodities, falls under the jurisdiction of the CFTC. Speaking at the Milken Conference in May, CFTC Chairman Rostin Behnam he said that cryptocurrency companies can expect to see “another cycle of enforcement actions.”

Regulatory agencies routinely engage in fact-finding around companies that fall under their jurisdiction. In March, Fortune reported that the SEC has sent subpoenas to crypto companies regarding their dealings with the Ethereum Foundation, although no charges have been filed yet.

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