Jump Crypto was one of the most active traders on Sam Bankman-Fried’s FTX and Do Kwon’s Terra/Luna/Anchor platforms. However, after losing at least $300 million after the collapse of FTX and untold civil ramifications for its role in Terra LUNA’s demise, Jump’s crypto heyday has passed.

It has liquidated various DeFi positions on platforms like Lido and is sending tens of millions of dollars in proceeds to centralized exchanges.

Jump is facing at least two class action lawsuits and a Commodity Futures Trading Commission (CFTC) investigation. Blockchain evidence from the weekend indicates that it might be trying to raise cash.

According to work sponsored by Bitget, researchers claim to have deanonymized wallets belonging to Jump that have redeemed over half a billion dollars worth of Lido’s wrapped staked ether (wstETH) and sent tens of millions of dollars to centralized exchanges.

Other rumors are circulating that Jump is shuttering its market-making business altogether. These are seconded by RealVision’s Raoul Pal.

Is Jump still a crypto market-maker?

Arkham also claims to have deanonymized wallets belonging to Jump. Its research claims that Jump’s crypto balances peaked at $9.6 billion in November 2021 and are now worth just $560 million. Worse, alpha exposure to crypto is even further limited to just 6% of this portfolio, with 94% in stablecoins USDC and USDT.

Another wallet that Jump Crypto might control has an additional $130 million worth of ether and ether derivatives.

Jump’s comedown is even more suspicious given that Kanav Kariya stepped down as president on June 24 and has not posted to X since.

Of course, as a sophisticated market participant and over-the-counter (OTC) dealer with access to listed and unlisted exotic derivatives, it’s impossible to determine Jump’s full portfolio using simple blockchain forensics as this cannot account for paper contracts or centralized exchange positions.

Read more: Jump Crypto’s shady backers could make things worse during CFTC probe

Jump’s legal woes continue

In the courts, Jump has several unresolved lawsuits. On June 6, Jump Trading LLC faced a setback in the US District Court for the Northern District of Illinois. A class action lawsuit led by Taewoo Kim won its request to deny a venue transfer and lawsuit consolidation request by the former president of Jump Trading’s crypto arm, Kanav Kariya.

That Illinois class action will proceed and is distinct from an additional class action lawsuit in California led by Nick Patterson. Both classes assert Racketeer Influenced and Corrupt Organizations Act (RICO) claims against Jump Crypto for counts of aiding and abetting, conspiracy, and unjust enrichment.

Last month, Fortune interviewed numerous sources and concluded that Kariya was, at least in part, a frontman. An anonymous whistleblower also claimed that behind the scenes, jump co-founder Bill DiSomma “was still pulling most of the strings at Jump Crypto.”

Fortune reported that court observers are watching dockets for signs of possible regulatory actions against Jump Trading or its crypto arm. The US Department of Justice mentioned Jump Crypto’s role in the 2021 Terra (UST) stablecoin de-peg.

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Jump Crypto has fallen from grace. Despite its best efforts to distance itself from Sam Bankman-Fried following the spectacular collapse of FTX, Jump had unfortunate ties to his fraudulent empire that the CFTC might now be investigating.

As Michael Lewis documented in his book Going Infinite, Jump was one the largest market-makers on FTX and lost at least $300 million during its collapse. The firm, along with FTX Founder Sam Bankman-Fried, supported Solana and in the most expensive private bail-out in crypto history, funded Solana‘s then-largest interblockchain asset bridge, Wormhole.

Fortune reported on June 20 that the US Commodity Futures Trading Commission (CFTC) is investigating Jump, but didn’t provide details about the nature of its inquiries. On June 24, Bloomberg reported that Jump president Kanav Kariya stepped down.

The CFTC hasn’t sued Jump nor commented on its investigation and it’s important to remember that the existence of an investigation isn’t an indication of guilt or wrongdoing.

However, FTX’s support of Jump — and the CFTC’s investigation — is only a small part of the trading giant’s backstory. Indeed, Jump has many questionable backers.

Shady supporters of crypto‘s quant trading giant

For example, a vocal supporter of Jump was Do Kwon, the founder of Terra Luna which was once worth $29 billion but is now worthless. Kwon fawned over Jump’s president, Kanav Kariya, calling him a ‘bro‘ and ‘wunderkind.’

Kariya even served as a member of the Terra Luna Foundation Guard’s governing council.

Later, the Securities and Exchange Commission (SEC) explained how Kwon defrauded investors, and a jury agreed that he committed civil fraud. Kwon must pay more than $200 million as a result, and Terraform must pay $4.3 billion — likely more than it possesses.

Worse, the world learned during that SEC lawsuit that Jump was intimately involved in the operations of Terra (UST), Kwon‘s so-called algorithmic stablecoin. Far from algorithmic in actual practice, Jump manually traded and pumped money in to support Terra‘s price on several occasions.

Read more: How Jump helped US Robinhood users trade offshore at FTX

Su Zhu was also a Jump supporter and praised it for being diamond-handed and pro-crypto with a track record of ‘minimal balance sheet aggression’ and trading domination.

Authorities sent Zhu to prison in Singapore late last year and his fund, Three Arrows Capital, has since become a poster child of failed crypto hedge funds.

Jump also finds support among Asymmetric investors. Solana co-founders, Anatoly Yakovenko and Raj Gokal are limited partners in Asymmetric, Joe McCann’s $1 billion crypto hedge fund. McCann praises Jump’s efforts as bullish investment considerations for Solana, which he holds in Asymmetric.

For example, he praised Jump’s custom hardware and code build for Solana’s second-biggest validator software client.

Other limited partners in Asymmetric read like a leaderboard of embarrassing crypto fund managers: FTX itself, Tiger Global founder Scott Schleifer, and Multicoin Capital’s Kyle Samani and Tushar Jain.

• FTX is the most spectacular exchange collapse in crypto history. Its executives stole customer deposits and recklessly used those funds to trade on tiny altcoins like MobileCoin and FTT. Via plea or conviction, four FTX executives are guilty of 21 combined criminal counts.
• Tiger Global is most famous for losing 56% of its multi-billion dollar fund within one year. Needless to say, multi-billion dollar funds managing retirements, pensions, and endowments aren’t supposed to do that. Schleifer was in charge of Tiger’s VC fund which lost over $30 billion in 12 months.
• Multicoin Capital is also famous for one thing: helping VCs dump cheap Solana tokens onto retail bagholders.

Read more: Did Jump Crypto cause Solana stablecoin volume to collapse?

Multicoin was also the fund through which All-In Podcast members like David Sacks were able to sell rights to Solana (SOL) allocations during its pre-FTX bubble in 2021. When Sacks laughed on-air about selling millions of dollars worth of Solana exposure alongside fellow VC Chamath Palihapitiya, their privileged laughter became a global meme for how billionaires dump crypto bags on retail believers.

At the time, everyone knew SOL was a ‘Sam coin,’ a darling of Bankman-Fried who would later earn a 25-year prison sentence for his crimes.

VCs like Sacks and Palihapitiya had acquired SOL exposure via Multicoin for under $0.25 apiece. They laughed about selling at prices before their show aired on October 8, 2021, when SOL was trading above $155. 

Sacks invested in Multicoin Capital’s first fundraise. He and his funds at Kraft allegedly made a $1 billion profit thanks to Multicoin’s early allocation of SOL. 

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This week, a chart circulated that appeared to show stablecoin volume on the Solana blockchain declining over 90% since a series of bad events at Jump Crypto, one of Solana’s biggest trading shops. 

However, whether or not Jump decreased its Solana trading activity, the claim that stablecoin volume is down 90% falls apart quickly on semantics alone.

Before addressing that issue, here’s a quick summary of recent events at Solana and Jump Crypto:

• The CFTC launched an investigation into Jump Crypto, one of Solana’s biggest traders.
• The leader of Jump Crypto, Kanav Kariya, suddenly left the company.
• Pump.fun, a Solana meme coin generator, has gone viral, platforming countless celebrity rug-pulls.
• Solana announced two new types of on-chain transactions, ‘Blinks’ and ‘Actions.’ Both are non-financial codes that allow people to transact on Solana’s blockchains directly from websites and social platforms by clicking simple buttons like ‘Share’ or ‘Like.’

And for further context, yes, Jump Crypto is one of the most important entities in the Solana ecosystem.

• Jump is a prolific trader of Solana-based crypto assets.
• The company develops code proposals for Solana’s consensus repositories.
• Jump is building Solana’s second-biggest validator software client — second to Solana Labs’ own client.
• Jump funded the largest-ever bailout of Wormhole, Solana’s then-largest asset bridge.

Back to that supposed Solana stablecoin collapse

‘Volume’ of stablecoin transactions on Solana doesn’t mean actual trades or peer-to-peer transfers. Instead, most dashboards include all stablecoin transactions in their ‘volume’ category, even if the transaction is entirely non-economic.

First, wash trading or trading back-and-forth with oneself runs rampant across decentralized finance, but that’s only the beginning of the non-economics of stablecoin ‘volume’ on Solana.

Second, many stablecoin transactions are simply unfilled orders. Specifically, Solana’s so-called decentralized exchanges (DEXs) often broadcast all orders — even unfilled orders — onto Solana’s blockchain. Why not? Solana boasts the highest throughput and cheapest transaction fees of any major blockchain, so it is trivial for exchanges to simply broadcast bids and offers on-chain.

Counting unfilled stablecoin orders as ‘volume’ is highly misleading – especially when those program interactions account for over 99% of the total volume figure.

Worse, and returning to the point about wash trading: Many observers of crypto market data don’t understand the staggering extent of wash trading in crypto. Wash trading percentages on even the most highly regulated, New York City-based crypto trading pairs can reach 70%.

On offshore exchanges like Binance, that percentage has exceeded 99% on some pairs.

Finally, many stablecoin transactions are intentionally mislabeled. In other words, the data is a lie. Crypto exchanges are notorious for simply lying about their trade volume. Indeed, Bitwise once estimated that 95% of exchange-reported bitcoin transactions never occurred. Other academics have guessed at other percentages, but it’s impossible to know anything remotely close to the real number unless every crypto exchange operator were somehow forced to tell the truth — which will never happen.

Read more: Fantom stablecoin watcher alleges ‘liquidation’ scheme

Does it matter anymore if 99% is fake anyway?

In conclusion, the news about stablecoin volume on Solana collapsing after bad news at Jump Crypto seems to be overstated. Most of Solana’s real stablecoin volume figures are disconnected from the reported unfilled and wash trades by orders of magnitude.

When further compounded by crypto exchanges mislabeling and outright lying about their trading data, plus Jump Crypto’s ability to obfuscate its activities through on-chain privacy and OpSec practices, it’s almost impossible to know how much impact the news about Jump has impacted Solana’s stablecoin volume.

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Recently unsealed documents reveal that Jump Crypto president Kanav Kariya pled the Fifth when asked about an alleged backdoor bribe made with Terraform Labs founder Do Kwon back in 2021, in an attempt to re-peg stablecoin TerraUSD (UST).

According to the SEC, Kariya and now-imprisoned Kwon agreed in May 2021 that Jump Crypto would manipulate the price of UST in exchange for amendments to the terms of Jump’s LUNA loan agreement. In February, sources familiar with the case told reporters that Jump Crypto made $1.28 billion dollars in profit from Kwon’s now-decimated crypto empire.

“And when you asked Do Kwon to lift the vesting conditions in exchange for Jump’s agreement to buy up UST to restore the peg, Do Kwon agreed to that, correct?” SEC counsel Devon Staren asked Kariya in court on August 18.

“On the instruction of counsel I exercise my rights under the Fifth Amendment and decline to answer the question at this time,” Kariya replied (via Blockworks). The Jump Crypto president pled the Fifth a total of nine times, according to his recently unsealed deposition.

Read more: Jump Crypto profited from Terra Luna as investors lost billions

The SEC’s ongoing case against Kwon and Terraform Labs alleges that they violated securities laws and defrauded investors. Both the SEC and the defense have filed for summary judgement — while Kwon’s lawyers believe the case should forego a trial by jury because the SEC has failed to prove its clients broke the law, the commission has asked for swift judgement because the alleged fraud and sale of securities is “clear, undisputed, and overwhelming.”

Kariya was deposed at the end of August for his alleged involvement. Kwon was a fugitive until his arrest in Montenegro, where he is currently serving time in prison after local courts found him guilty of document forgery. He awaits extradition.

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Sources familiar with the Securities and Exchange Commission’s (SEC) lawsuit against Do Kwon have named Jump Crypto as the beneficiary of $1.28 billion dollars in profit from his decimated crypto empire, Terra Luna.

Do Kwon is facing civil charges in the US. The SEC alleges that he and his company, Terraform Labs, raised billions of dollars through unregistered securities. 

At its peak, Terra Luna’s ecosystem claimed mark-to-market capitalization in excess of $40 billion. Today, it’s barely millions. The governance token and stablecoin at the center of that empire are worth less than one cent.

Nevertheless, sources told reporters that the crypto arm of Chicago-based trading firm Jump Trading earned billion-dollar profits from Terra Luna. Jump Crypto was also closely tied to Sam Bankman-Fried and his favorite blockchain, Solana. Jump Crypto bailed out the Solana-Ethereum bridge, Wormhole, within hours of its $300+ million hack.

Read more: Jump Crypto ties to FTX and Solana put Robinhood users at risk

Jump is a decabillion-dollar institution in Chicago. Although it has operated market-making and quantitative trading operations for decades, it only recently began proprietary crypto trading after the ICO boom of 2017.

Jump Crypto makes big profit while Terra destroys livelihoods

Kwon and Terraforms Labs harmed investors. Well-connected insiders like Jump Crypto are benefiting while regular investors have lost billions.

The SEC alleges that Terraforms Labs failed to provide investors with information about the staggering risks of its tokens and properties. In May 2022, UST lost its peg to the dollar and collapsed. Not only did UST, LUNA, and MIR directly cause tens of billions in losses, their demise rippled across the industry, triggering a cascade of bankruptcies for other digital asset organizations.

The SEC has classified Terraform Labs’ sale of governance token LUNA and stablecoin Terra USD (UST) as illegal securities offerings. Similarly, Terraform Labs’ Mirror Protocol illegally marketed MIR and mAssets as pegged to US equities, according to the commission.

The SEC further alleges that Terraform Labs marketed these tokens with attractive returns. Statements from marketing materials showcase how Kwon and Terraform Labs passed the Howey Test, a four-prong Supreme Court test for securities offerings. For example, Kwon touted UST as pegged to the US dollar and advertised the interest-earning potential of UST through his affiliated Anchor Protocol.

Do Kwon is on the run

Do Kwon has been a fugitive since UST and LUNA collapsed. South Korea issued a warrant for his arrest and revoked his passport. Since then, he has fled to Singapore. Authorities believe he is hiding somewhere like Serbia, where he was spotted at the end of last year, or elsewhere in Europe. He surfaced long enough to taunt law enforcement authorities with an offer for a meeting.

Read more: Terra founder Do Kwon ordered to comply with SEC subpoena

He retweeted a few things in December 2022 in a vain attempt to demonstrate that Terra 2.0 and LUNA 2.0 are still alive. He also tweeted a link to a New York Times article accusing Sam Bankman-Fried’s companies of market manipulation, heavily implying that Bankman-Fried personally manipulated UST. Since then, his Twitter account has gone inactive.

Do Kwon attempted to rebuild UST and Luna and recover UST’s peg. He launched so-called Terra 2.0 as a reboot of UST. That initiative flopped within hours.

The SEC alleges that Kwon removed 10,000 bitcoin from the Terraform Labs ecosystem and swapped the bitcoin for cash using a bank in Switzerland. An SEC court filing explains that Kwon might have withdrawn more than $100 million from the Swiss bank account since June 2022.

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Over the years, Jump Crypto, the crypto-specific arm of Chicago-headquartered trading firm Jump Trading, has worked alongside some of the most prominent firms and individuals in the crypto space. However, it’s also been embroiled in its fair share number of high-profile controversies.

Jump’s ties to FTX

Jump and FTX go way back and the relationship is a deep one. However, the links haven’t always been viewed favorably. Indeed, Jump was accused of colluding with Sam Bankman-Fried’s Alameda Research on seed funding rounds and yield farming investments.

It’s also been alleged that Jump withdrew $300 million in assets from FTX the day before the exchange paused withdrawals. That wallet spent a few days routing USDT and USDC to two other Ethereum addresses. It also routed thousands of ETH to at least two other wallets.

To be fair, Jump has acknowledged its exposure to FTX but maintains that its finances were “managed within accordance with our risk framework.”

Jump previously had to bail out its own company

In February 2022, Jump Crypto paid $320 million to bail out token bridge Wormhole after hackers stole $325 million in Wormhole-wrapped ether on Solana. How had it acquired those funds? According to Jump Trading president Dave Olsen, it bought 120,000 ETH, which was then worth $3,000 per ETH. This eventually led to rumors that it could have dipped into digital assets belonging to Menlo Park-based exchange Robinhood to cover Wormhole’s losses.

Wormhole acts as an intermediary for crypto asset swaps between Ethereum (ETH) and Solana (SOL) blockchains, allowing users to transform Ethereum tokens into Solana-bound ones and vice versa.

But smart contract hackers exploited a bug to mint hundreds of millions of dollars worth of Solana-based Wrapped ether (WETH) without posting the required ether collateral.

Its president has close links to now-defunct Terra

Kanav Kariya became Jump Crypto’s president in September 2021 after a stint as an intern at Jump Trading Group’s digital asset division.

Under Kariya’s watch, Jump began developing tools like Pyth, which provides real-time asset pricing data for DeFi applications. Jump has also continued its support for Solana, agreeing to develop upgrades for Solana’s software and build a new validator client.

As well as heading up Jump Crypto, Kariya is also a member of Luna Foundation Guard’s (LFG) governing council. This is significant because, as previously reported by Protos, LFG transferred more than 52,000 bitcoin (BTC) from its reserves to Jump Trading in an effort to defend the price of terraUSD (UST).

According to a recent independent report, however, Jump provided no details about the transactions it made.

The company has made some interesting decisions

In the wake of the FTX meltdown, Kariya published a number of tweets that led to people calling for greater transparency. However, he seems to be ignoring them beyond acknowledging that they were “down bad.”

Read more: Jump Crypto ties to FTX and Solana put Robinhood users at risk

In addition, Jump Crypto reportedly sued a Carl Sagan fan for the Wormhole.com domain and, alongside FTX, co-led Coral’s $20 million funding round. Coral is building developer tools for Solana, including the smart contract developer framework Anchor and what it calls “web3’s iPhone.”

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

The post A look at Jump Crypto and its shady past appeared first on Protos.

According to a new independent report, Luna Foundation Guard (LFG) transferred more than 52,000 bitcoin (BTC) from its reserves to Jump Trading as part of its efforts to defend the price of terraUSD (UST). However, observers have already started to point out that there are certain, crucial details missing.

The report by third-party auditing firm, JS Held, was commissioned by LFG, it says, to answer a number of questions, namely:

• Were any LFG funds misappropriated, embezzled, or stolen?
• Were any LFG funds used to benefit insiders?
• Does LFG hold funds other than its publicly declared wallets?
• Were any of LFG’s funds frozen?

The 31-page document details how LFG spent $2.8 billion trying to save UST and how Terra developer Terraform Labs spent around $613 million trying to prop up the failing coin.

Their efforts were ultimately in vain, however, and the entire Terra ecosystem imploded in May.

Despite the details about LFG and TFL’s spending, as pointed out by Twitter user FatManTerra, the audit raises a number of questions.

For starters, the report says that no funds were taken by insiders, but there’s no explanation as to why 47,189 BTC was given to Jump. Indeed, there are no details regarding Jump’s trades at all (this is also referenced in the report’s small print).

Tweeting about this anomaly, FatMan said: “TFL sends Jump BTC, and Jump sends TFL UST… That’s it. No trade logs for this tranche! There are several issues here, as Jump was heavily involved in the Terra ecosystem and could have simply cleaned up their own book. Despite claiming full transparency, this part is omitted,” (our emphasis).

Read more: Jump Crypto forced to save Solana with $320M bailout of its own company

Jump founder also sits on LFG council

The fact that Jump Trading was used by LFG to do its BTC trades is particularly noteworthy, not least of all because Kanav Kariya, a member of the LFG governing council, is one of the two co-founders of Jump Crypto, Jump Trading’s crypto-specific arm.

Jump has also previously been embroiled in major token-related controversies. Back in February, the company paid $320 million to bail out its own token bridge Wormhole when hackers exploited a bug to mint hundreds of millions of dollars worth of Solana-based Wrapped ether (WETH) without posting the required ether collateral.

And this week, Protos reported how investors in Robinhood fear that the fallout from the collapse of Sam Bankman-Fried’s exchange FTX could affect trades being processed by Jump Crypto.

As a result, Catherine Wood’s Ark ETF Trust has disclosed $10 million in Robinhood share sales in favor of $21 million purchases of Coinbase shares. JP Morgan has downgraded Robinhood from Neutral to Underweight.

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The post LFG audit raises questions about Jump Trading and Terra collapse appeared first on Protos.

Investors in the investing app Robinhood fear that contagion from FTX could affect their trades being processed by Jump Crypto. The link between Robinhood, Jump, and FTX is direct: Sam Bankman-Fried (SBF) notably owned 7.6% of Robinhood’s stock and once claimed to be preparing a full acquisition offer for Robinhood.

Institutional investors are selling first and asking questions later. Already, Catherine Wood’s Ark ETF Trust (NYSE:ARKK) has disclosed $10 million dollars worth of Robinhood share sales in favor of $21 million purchases of Coinbase shares, according to ARKK’s latest SEC filing.

Analysts at JP Morgan also downgraded Robinhood from Neutral to Underweight and reduced its price target by 11% on November 3. The day prior, Robinhood disclosed that it lost 1.8 million customers from the second to third fiscal quarter of 2022, and its quarterly revenue missed Wall Street expectations by $11 million.

Robinhood advertises so-called “commission free” stock and digital asset trades. It accomplished that feat by selling order flow to quantitative trading shops like Citadel and Jump Crypto.

Chicago’s quantitative trading giant Jump Trading has provided (expensive) execution services for Robinhood’s digital asset orders. In 2015, Jump formed Jump Crypto, a subsidiary focused on developing advanced digital asset-related technologies, including low-latency proof generation for Zero Knowledge (ZK) proofs.

Jump Crypto supported FTX, LUNA, and Solana before Robinhood

Jump and SBF’s crypto exchange FTX, as well as his crypto trading firm Alameda Research, were consistent cheerleaders of Solana (SOL). SOL is trading 94% below its all-time high.

SBF worked alongside Jump to organize a bailout of the prominent Solana-Ethereum blockchain bridge, Wormhole, that protected the value of Solana’s ecosystem.

Jump Crypto had been supporting Solana even before then. As the parent company of the cross-chain bridge Wormhole, it jumped in to rescue it from a February 2022 exploit that stole $320 million in assets. It replaced a staggering 120,000 stolen Ethereum (ETH).

Read more: Jump Crypto forced to save Solana with $320M bailout of its own company

Solana tapped Jump Crypto to create a second validator and increase its network thoroughput. That effort became “Firedancer,” which Jump Crypto anticipated would take about two full years to complete.

With enough ETH to bail out Wormhole after such a massive exploit, one could assume that Jump Crypto is sitting on a pile of digital assets. However, where would it have come across $320 million in ETH at a time when it was making bets on other assets that might have been ill-advised? Unnconfirmed rumors are now circulating that it could have secretly dipped into Robinhood customer assets.

In May 2019, Bloomberg journalists received a scoop that Robinhood was using Jump Trading to fill orders for digital assets. Since then, Jump Crypto had time to view vast numbers of orders by Robinhood traders.

As the FTX and Celsius fall-out have revealed, crypto custody providers and order routing services sometimes dip into their customer assets inappropriately. Sometimes, nefarious executives use order flow or traders’ holdings for their own benefit or to bail out another subsidiary, without disclosing their actions for days or weeks.

Read more: Celsius manipulated CEL token to bolster balance sheet, filing says

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

Update 17:10 UTC, Nov 18: Since publication, Robinhood has posted a comprehensive Twitter thread addressing a number of issues discussed in the article, namely lending and leveraging using customers’ crypto assets, the firm’s risk controls, and storage of its crypto.

The post Jump Crypto ties to FTX and Solana put Robinhood users at risk appeared first on Protos.

The crypto subsidiary of trading giant Jump sunk $320 million to bailout its own token bridge last week, preventing potential meltdown across Solana and Ethereum markets.

Wormhole acts as an intermediary for crypto asset swaps between Ethereum (ETH) and Solana (SOL) blockchains, allowing users to transform Ethereum tokens into Solana-bound ones and vice versa.

But smart contract hackers exploited a bug within Wormhole to mint themselves hundreds of millions of dollars worth of Solana-based Wrapped Ether (WETH) without posting the Ether collateral usually required.

• The thieves could then siphon Ether from the Wormhole protocol via the real Ethereum blockchain — a staggering sum that Jump reimbursed just hours later (some WETH was reportedly traded for other tokens on Solana’s network).
• This meant the 120,000 WETH tokens minted by the hackers were completely unbacked when they should’ve been fully backed by an equal amount of Ether.
• There’s currently 483,499 WETH tokens deployed to Solana, which means at least 25% of WETH’s supply on that network was initially minted by the hackers.

Jump Crypto’s bailout makes complete sense considering the firm acquired Wormhole developer Certus One for an undisclosed sum last August.

Berlin-headquartered Certus One has primarily built software for Proof-of-Stake blockchains, particularly staking optimizers, having operated since 2017.

Certus One’s platform has been reportedly utilized by the Terra and Cosmos ecosystems alongside Solana. The company’s website no longer exists and instead points directly to Jump’s own portal.

Wrapped Ether is used significantly across Solana’s DeFi ecosystem. It allows users to trade and otherwise utilize tokens representing exposure to Ether across various liquidity protocols and decentralized exchanges now native to Solana.

Had Jump decided not to plug Wormhole’s losses, it’s generally believed that Solana’s DeFi protocols would’ve suffered cascading liquidations triggered by a collapse in WETH confidence and prices.

“If the [WETH] wasn’t backed up with Ether, it ​​would mean that a number of Solana-based platforms that accept [WETH] as collateral could become insolvent,” wrote blockchain analytics unit Chainalysis in its post-mortem (our emphasis).

“We could have seen users rush to sell their [WETH], causing its value to crash, which would have serious implications for the Solana blockchain and the extensive DeFi ecosystem built on top of it, as many of these protocols also rely on [WETH] to back assets issued to users.”

Wormhole hack forced Jump Crypto outside the curtain

Jump Trading is a Chicago-headquartered private quantitative trading firm (or “quant shop”) which has been historically tight-lipped about its immensely profitable operations.

Jump Trading was founded in 1999 and cut its teeth high-frequency trading on the Chicago Mercantile Exchange. It formed venture firm Jump Capital in 2012.

But the firm really made news for the first time in 2014 when New York prosecutors subpoenaed it and five other quant shops over potential “dark pools” and other special arrangements with exchanges on which it traded.

Jump Trading would reportedly start dabbling in crypto markets around one year later, eventually working with derivatives platform BitMEX, Tether issuers Bitfinex, and Robinhood Crypto.

A regulatory filing indicates that Robinhood earned 17% of its revenue from a Jump Trading subsidiary in 2021’s third quarter. The company paid Robinhood almost $250 million to route crypto trading orders through its systems during this period.

Jump Capital coincidentally raised $350 million in a massive funding round around the same time. It announced an increased focus on crypto startups and now employs over 140 workers just within its crypto division, according to a tweet from Jump Crypto lead Kanav Kariya.

Also last September, Jump Trading spun out Jump Crypto as its own fully-fledged subdivision. Almost immediately, the crypto unit faced its first serious test in the form of a severe Solana network outage on September 14.

Much like the recent Wormhole incident, Jump Crypto was a leading coordinator with Solana insiders to bring the blockchain back online.

Jump Crypto too deep in Solana not to help

Indeed, like Sam Bankman-Fried’s Alameda Research, Jump is one of Solana’s largest market makers, arbitrageurs, and institutional investors, with billions of dollars worth of capital deployed across Solana’s ecosystem.

Protos revealed in November that Jump is a direct customer of Tether and at the time had received over 98% of all USDT issued on Solana.

Jump Crypto signed a deal with Solana startup Serum for an undisclosed sum last year.

This encouraged the firm to plug its USDT into Serum-powered decentralized exchanges like Mango to boost their liquidity, as well as “make markets” by keeping order books greased.

USDT and SOL are the primary denominators for trading pairs on Solana-based exchanges.

In fact, it’s incredibly likely that Jump’s USDT denominate more than $1 billion worth of positions across dozens of Solana and Ethereum-based exchanges, warranting its decision to cover Wormhole’s losses even further.

Read more: [Tether Papers: This is exactly who acquired 70% of all USDT ever issued]

Jump’s previous investments in the crypto niche include Mexico City-based exchange Bitso, Austrian exchange BitPanda, and Indian exchange CoinCDX.

Its portfolio also includes the decentralized finance firm 0x, data feed provider Pyth, and compliance software Notabene.

Jump and FTX both love Solana

Hypothetically, Alameda Research’s Bankman-Fried could’ve also been swayed to bailout Wormhole.

Solana is often described colloquially as the billionaire wunderkind’s personal blockchain network, and Bankman-Fried remains one of its most persistent cheerleaders.

Jump Crypto and Alameda Research often contribute to the same funding rounds for startups like Tulip Protocol, Zeta, and Three Arrows.

Both Jump Capital and Alameda Research’s sister org FTX invested in ventures like gaming studio Faraway. 

Like all blockchains, Solana describes itself as decentralized. And while there’s many different metrics for that spectrum, the code powering Solana is anything but.

In a September podcast, Solana founder Anatoly Yakovenko revealed that just 20 people were active contributors to Solana’s code — 15 of whom work for Yakovenko.

Still, Jump Crypto is clearly the loser in this particular scenario as it’s down $320 million just to keep Solana’s DeFi protocols afloat.

All while Solana’s network’s native token SOL has firmly rebounded from its 15% drop inspired by the Wormhole hack. SOL now even trades 6% up on its pre-Wormhole price.

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Edit 09:44 UTC, Feb 8: Clarified it was a Jump Trading subsidiary paid by Robinhood in paragraph 16 (not Jump Crypto). Bitpanda is an Austrian crypto exchange in paragraph 26

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