The CFTC is probing Jump Crypto

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

The investigation, which proves no wrongdoing, comes after three turbulent years for Jump. The firm is known for its expertise in algorithmic trading and, more recently, as one of the most active market makers and investors in the cryptocurrency space before being involved in a series of hacks and collapses. Jump has since scaled back its efforts in the cryptocurrency space, including spinning two of his high profile projects and giving up of the Bitcoin ETF spot tender.

Representatives for the CFTC and Jump declined to comment.

Commercial problems

Jump has been known for years as one of the top players in the secretive world of high-frequency trading. In September 2021 he made headlines with the public announcement of its crypto division, Jump Crypto, even though the company had been quietly active in the industry for several years. Jump named Kanav Kariya, a former intern then in his mid-twenties, team president, catapulting him into one of the highest-profile roles in the industry.

Jump has played a key role in the nascent industry, serving as the primary market maker across exchanges, often working with crypto projects to provide liquidity to newly launched tokens. The company has also become a leading venture investor in the sector, as well as creating an incubation and engineering arm that has helped develop major projects, including WormholePyth and Firedancer.

However, cracks soon began to emerge in Jump’s prodigious operation, including the $325 million Wormhole cyberattack, a decentralized financial platform designed as a bridge between different blockchains. Jump quickly plugged the hole, illustrating the depth of its balance sheet. After the collapse of FTX in late 2022, it was soon revealed that Jump was a major market maker on the stock exchange, LOSE nearly $300 million, according to the book Going Infinite by Michael Lewis.

Jump was again embroiled in controversy during the February 2023 SEC conference cause 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 firm had secretly supported Terra Anchor during a near-collapse in 2021. filings—released the company as Jump. The SEC accused Terraform and Kwon of fraud after they publicly claimed that the picket line had been reset naturally, but did not file charges against Jump. After a trial this spring, which included testimony from a former Jump employee who served as a whistler for the SEC, a jury side with the agency in April.

In March 2023, the Department of Justice archived a criminal case against Kwon. As in the previous SEC lawsuit, the complaint named Jump as a “U.S.-based proprietary trading company” that helped keep Terra anchored but, again, did not allege any wrongdoing or file any charges against the company. An attorney for Kwon did not respond to a request for comment.

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

Regulatory agencies routinely engage in fact-finding about companies within their jurisdiction. In March, Fortune reported that the SEC had issued subpoenas to crypto companies regarding their dealings with the Ethereum Foundation, although no charges have yet been filed.

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