SEC Targets Tai Mo Shan, Deutsche Bank, and Silver Point in Regulatory Actions

Highlights:

• The SEC has charged Tai Mo Shan for misleading investors about Terra USD stability. 
• Deutsche Bank fined $4M for delaying suspicious activity reports linked to suspected illegal transactions. 
• Silver Point Capital faces action over weak policies to prevent misuse of confidential market information.

The US Securities and Exchange Commission (SEC) has targeted major corporations in its latest move. SEC filed charges against Tai Mo Shan Limited for lying to investors about Terra USD (UST) being stable. Terraform Labs created the stablecoin, which was promoted as sustaining a $1 peg through an algorithmic mechanism. However, in May 2021, UST’s reliance on external actions was hidden during a devaluation, with Tai Mo Shan intervening to stabilize its price.

The U.S. SEC charged Jump Trading subsidiary Tai Mo Shan Limited with misleading investors about the stability of Terra USD (UST) and acting as a legal underwriter in unregistered transactions in the LUNA crypto asset. As part of the settlement, Tai Mo Shan agreed to pay $123…

— Wu Blockchain (@WuBlockchain) December 21, 2024

The SEC said that Tai Mo Shan had struck an agreement with Terraform Labs to buy UST when its value dropped below $1. Terraform in return offered Tai Mo Shan discounted LUNA token incentives. To restore its peg, Tai Mo Shan spent more than $20 million on UST. The move temporarily stabilized the price of the stablecoin. 

The SEC claimed that investors believed Terraform’s algorithmic mechanism maintained the peg. In reality, Tai Mo Shan’s trades drove the price stabilization. The SEC categorized this conduct as negligent, stating it deprived investors of accurate market information. 

Unregistered LUNA Sales by Tai Mo Shan

The SEC also accused Tai Mo Shan of selling unregistered securities. The company acquired LUNA tokens from Terraform Labs intending to resell them on U.S.-based trading platforms. Between January 2021 and May 2022, Tai Mo Shan acted as a statutory underwriter for LUNA, which the SEC classified as a security. 

This activity violated U.S. securities laws. Tai Mo Shan agreed to pay $73.45 million in disgorgement, $12.91 million in prejudgment interest, and a $36.72 million civil penalty. These penalties address the profits obtained from the unregistered transactions. 

Although Tai Mo Shan neither admitted nor denied the SEC’s findings, the company agreed to comply with a cease-and-desist order.

SEC Penalizes Deutsche Bank Securities for SAR Delays

Deutsche Bank Securities In has been fined $4m for failing to file Suspicious Activity Reports (SARs) in time. SARs are required to be filed by broker-dealers when they have a suspicion that a transaction involved illegal activity or was perpetrated for criminal purposes. 

Deutsche Bank Subsidiary has agreed to pay a $4 million fine to settle charges from the U.S. Securities and Exchange Commission (SEC) for failing to file certain suspicious activity reports (SARs) on time.#SEC pic.twitter.com/972Di2zp2q

— Chad All-In Top Daily Crypto News (@Chad_allin) December 20, 2024

Between April 2019 and March 2024, the SEC found that Deutsche Bank Securities did not file SARs under that policy. It took at least two years to file the required reports for at least two cases. The delays, according to the SEC, violated Section 17(a) of the Securities Exchange Act. 

In a settlement, Deutsche Bank Securities agreed to pay the civil penalty and to comply with censure and cease and desist order. 

Silver Point Capital Faces SEC Charges Over MNPI Policies

Silver Point Capital L.P. has been charged by the SEC for not enforcing policies preventing the misuse of material nonpublic information (MNPI). The investment adviser specializes in distressed companies, with consultants representing the firm on creditors’ committees. 

Today we charged registered investment adviser Silver Point Capital L.P. with policy failures regarding receipt of material nonpublic information about bonds issued by Puerto Rico. https://t.co/bizvBv1wq3 pic.twitter.com/sOALd62Swi

— U.S. Securities and Exchange Commission (@SECGov) December 20, 2024

The SEC found Silver Point lacked adequate policies to address the risks associated with MNPI. The firm’s failure to implement or enforce appropriate measures exposed it to significant regulatory violations. This action highlights the SEC’s focus on ensuring firms comply with regulations to prevent unfair market practices.