Through the business development process of Jump in the cryptocurrency field, we can find some clues about its true status.

Author: Fortune

Translation: Azuma, Odaily Star Daily

Editor's note: This article was published by Fortune on July 11th. Before the article was published, the U.S. Commodity Futures Trading Commission (CFTC) had begun investigating Jump, and signs of dramatic changes in Jump's business had emerged, with its public figure Kanav Kariya choosing to resign shortly thereafter.

A month later, rumors about the possible "collapse" of Jump grew stronger, and its selling behavior accelerated the market's downturn. In this article, perhaps we can find some clues about its true status through the business development process of Jump in the cryptocurrency field.

Internship of the Acting President

Inside Jump Crypto, business communications were always conducted through Zoom meetings. In May 2021, a group of employees gathered in a Zoom meeting room to discuss an increasingly serious crisis.

The Chicago-based financial firm Jump Trading earned a considerable reputation in the early 21st century "Flash Boys" era through high-frequency trading, but then the company's business gradually delved into the highly volatile cryptocurrency field.

The algorithmic stablecoin Terra (UST) was once the most prominent project in the cryptocurrency field that year, and Jump could be considered its silent partner. Terra aimed to maintain a peg of 1 USD through complex algorithmic mechanisms related to its native cryptocurrency LUNA, and Jump would coordinate this algorithm on the backend to support UST through trading. However, despite the confidence of Terra's founder Do Kwon, UST experienced a de-pegging situation in May of that year.

At that time, Jump had the opportunity to securely earn millions of dollars through a cooperation agreement with Terraform Labs (the developer of Terra), but continuing in this manner would likely lead to a rapid collapse of Terra. Jump's co-founder Bill DiSomma did not want to give up on this "cherished project," so he joined the Zoom meeting to try to find a better solution.

A few minutes later, a solution emerged. According to testimony provided by Jump later in court, a then 25-year-old intern, Kanav Kariya, joined the meeting and presented his solution.

During the meeting, Kariya said, "I have talked to Do Kwon, and they agree to give us options."

What happened next may have truly changed the development process of the cryptocurrency industry. According to court documents, in the following week, Jump secretly purchased a large amount of UST to create an illusion of thriving demand, in order to pull the value of the token back to 1 USD. At the same time, Kwon agreed to deliver up to 65 million LUNA (options) to Jump at a price of 0.4 USD, even though the peak price of LUNA in the secondary market had once exceeded 90 USD.

According to a later announcement by the U.S. Securities and Exchange Commission (SEC), Jump made a whopping $1 billion profit solely from this agreement. A few months later (September 2021), Kariya was rapidly promoted to become the president of Jump Crypto.

On the other hand, this operation restored the appearance of pegging for UST, and Kwon began to boast about the "natural recovery" of UST on X (then Twitter). According to court records, a Terra employee privately admitted in a text message, "If it weren't for Jump's intervention, we might really be screwed. Haha."

However, this controversial "savior behavior" only delayed but did not change the outcome for Terra. A year later, when UST de-pegged again, Jump was also powerless.

In May 2022, UST encountered a death spiral, evaporating $40 billion in just a few days. Countless investors lost their life savings in this event, and cries for compensation filled cryptocurrency communities such as Twitter and Discord, with some people threatening suicide. This collapse subsequently triggered a chain reaction in the entire cryptocurrency market, indirectly leading to the collapse of FTX in November 2022, and ultimately drawing high regulatory attention to the industry's risks.

However, it wasn't until 2023 that anyone knew that Jump had been secretly supporting UST behind the scenes, until the SEC filed a major fraud lawsuit against Terraform Labs and Kwon, partly based on the testimony of a whistleblower, James Hunsaker, from Kariya's team. Terraform Labs and Kwon reached a $4.5 billion settlement with the SEC in June, but since Terraform had filed for bankruptcy earlier this year, most of the funds may not be paid. Currently, Kwon still faces criminal charges from the U.S. Department of Justice (DOJ) and is awaiting extradition from Montenegro. Kwon has consistently denied any wrongdoing, and Terraform has not responded to our request for comment.

Although Jump has not been charged with any wrongdoing, their transactions with Kwon will clearly affect their reputation—business secrets have been exposed in the most ignominious of cases. In March 2024, the whistleblower testimony published by the New York Federal Court can be seen as a major setback for Jump's foray into the cryptocurrency industry.

Kariya declined to comment on the matter, and a spokesperson for Jump refused to allow any senior executives to be interviewed or to comment on the matter. We interviewed more than twenty former Jump employees, competitors, and industry traders, many of whom were afraid of retaliation and were only willing to speak on condition of anonymity. However, even though Jump's activities in the cryptocurrency field have diminished, it remains one of the most influential participants in the industry, controlling hundreds of millions of dollars.

At first glance, Jump's "legendary" story fits well with the narrative style of the blockchain industry, but what sets Jump apart is that it was originally a "giant" in the traditional financial industry, and it believed it could control this emerging market, much like an adult entering a child's game and walking away with billions of dollars, but in the end, it received the same painful lesson as many others who considered themselves clever.

A former Jump employee told us, "The history of finance needs to be written in the blood of investors."

The Mumbai Prodigy and the Windy City Titan

Since its founding in 2001, Jump Trading has become an important member of Chicago's long-standing financial circle. However, when 18-year-old Kariya enrolled at the University of Illinois in 2014, he had not heard of this company. Kariya grew up in a middle-class family in Mumbai, India, and learned about the top undergraduate engineering colleges in the United States from the news, choosing the University of Illinois from the list.

The cold winters of the Champaign campus did not deter Kariya, who, having enjoyed playing video games and watching war movies in his childhood, chose to major in computer science at the university—unlike many of his future colleagues, who often began learning programming in their childhood. Kariya later explained in a podcast that when he visited Disneyland at the age of 13 and toured several universities, he knew then that he wanted to come to the United States—"the infrastructure and the quality of education seemed very attractive… all the college campuses were equipped with computers."

Just a few years later, Kariya secured an internship at Jump Trading and quickly rose through the ranks during the golden age of cryptocurrency. Today, Kariya's name is almost as well-known in the cryptocurrency industry as Jump, partly because other high-ranking executives at Jump have consistently avoided the spotlight and instead pushed Kariya to the forefront.

In 2021, at the age of just 25, Kariya had become the president of the newly established Jump Crypto department. His typical appearance with black hair and a goatee would often appear on various lists of tech stars and cryptocurrency conferences, making him look like a cowboy.

At the University of Illinois, Jump's name did not appear on the campus recruitment list, and they did not post job postings on bulletin boards. Jump recruited graduates and students like Kariya more through private referrals. Jump's two founders, Bill DiSomma and Paul Gurinas, both started their careers at the Chicago Mercantile Exchange (CME), and before that, they had both attended the University of Illinois.

At CME, traders would bid through hand signals and loud shouting (which is also the inspiration for the name Jump), and DiSomma and Gurinas witnessed the revolution of online trading engulfing the world they were familiar with. They were determined to get a piece of the action in this revolution—In 1999, the two of them co-founded their own company, Akamai, which was later renamed Jump in 2001.

Similar to Michael Lewis's description in his book "Flash Boys" about the rise of high-frequency trading, companies like Jump (and their competitors, such as Jane Street and Citadel Securities) highly value the secrecy of their strategies—their advantage lies in technology, being able to be one step ahead in terms of trade completion speed or market efficiency discovery, and they protect these strategies with almost fanatical zeal.

John Lothian, a senior figure in the Chicago financial community, recalled signing a confidentiality agreement just to enter the front door of Jump's headquarters in the Montgomery Ward Building on the Chicago River, even though he was only there to request sponsorship for a community event, which Jump politely declined.

Lothian told us, "They just wouldn't let you into the office because it didn't fit with their confidentiality principles."

"Toy" Market

Jump's foray into the cryptocurrency industry also reflects the company's culture of secrecy. Some former employees and people familiar with the company's operations revealed that Jump initially only tentatively ventured into the field and treated the cryptocurrency business as a "testing ground" for interns, while isolating this part of the business from the main business.

By the end of 2015, Jump had established a research and development office at the founders' alma mater, which funded research projects and collaborated with professors to explore cutting-edge technologies, such as using VR headsets to simulate trading environments. They also hired university students as interns, discovering potential talent through word-of-mouth recommendations, and Kariya joined through a friend's recommendation.

Jump always faced a dilemma in training new recruits: the company needed to test the real abilities of potential employees, whether they could identify subtle opportunities in the financial markets and turn them into algorithmic trading models, while also not being able to entrust the most critical strategies and billions of dollars in capital to temporary employees.

Cryptocurrency provided a perfect solution, as the market had its own tradable assets, exchanges, and characteristics, and it was sufficiently isolated from Jump's stock and bond markets, posing no mutual threat.

A former anonymous employee of Jump told us, "It's a bit like a 'toy' market."

For young people involved in cryptocurrency business at Jump, they were not completely neglected. In fact, DiSomma himself was very interested in the vision of creating a decentralized market for cryptocurrencies. Supporters of cryptocurrencies believe that blockchain technology can completely eliminate intermediaries, such as brokers and clearinghouses. As a pioneer of online trading revolution, DiSomma had witnessed the trading market evolve from the crowded halls of CME to an internet-based model, and he was looking forward to the next paradigm shift.

So when Kariya joined Jump as an intern in January 2017, he was assigned to build early cryptocurrency trading infrastructure and had almost no management restrictions. In a podcast in January 2023, Kariya mentioned, "We could do our own thing freely… it's like working in a completely closed bubble."

The story that followed was that the bubble kept growing. In the year Kariya interned, Bitcoin achieved its first major bull run, rising from less than $1,000 in early 2017 to nearly $20,000 in December. According to a former employee, Jump's cryptocurrency team's importance within the company gradually increased, becoming one of the top-performing teams.

A significant change was that cryptocurrency gradually became more than just a toy for interns. Soon after the bursting of the Bitcoin bubble in 2018, Kariya graduated and joined Jump full-time, and his rise had begun.

Market-Making Giant

Companies like Jump, engaged in high-frequency trading, always have a layer of mystery surrounding them, and their main trading form is called "market-making."

When people go to exchanges, they need counterparties for both buying and selling. Market makers act as intermediaries in this process, competing to provide the best quotes. For market makers, the difference in each trade may be small—perhaps only a few cents per share—but in algorithm-driven systematic operation, this is a very profitable business.

In the traditional financial industry, market-making is a tightly regulated business, and regulators need to ensure that there are no conflicts of interest. Market makers do not directly cooperate with the companies issuing stocks, but rather work with exchanges under the supervision of regulatory agencies. Market-making and other businesses, such as venture capital, are usually physically separated to avoid any possibility of insider trading or market manipulation.

The cryptocurrency industry is completely different. As an emerging "wild industry," it is not subject to the cumbersome rules established over decades. Michael Selig, a lawyer at the law firm Willkie Farr & Gallagher, specializing in digital asset services, said, "In the cryptocurrency field, you don't have that direct regulation."

Market makers in the cryptocurrency industry not only cooperate with exchanges but also directly sign agreements with project parties, often helping them list on exchanges and then driving buying and selling by creating liquidity to attract traders and funds looking for the next hot token.

For this, project parties lend a large number of tokens to market makers to initiate trading. Some market makers also negotiate with project parties, asking them to give them an option, allowing the market makers to purchase a large number of tokens at a significant discount if the project progresses successfully. Selig stated that this reverse structure in the cryptocurrency industry (market makers cooperating with project parties rather than exchanges) makes sense to some extent, as project parties need to make tokens more actively traded.

This special model allows for a situation that would never be allowed in traditional finance to truly occur—while market makers can still make money from the spread in trading, huge income often comes from profitable options.

For companies like Jump, becoming a market maker for a project party means they can have almost unlimited profit potential without taking on real wealth risks. An anonymous founder of a cryptocurrency exchange told us, "If you work at Jump, you can decide which token will succeed."

Although other companies from traditional finance have also begun to enter the cryptocurrency field, such as Jump's old rival DRW, which established a blockchain department called Cumberland in 2014, Jump has quickly established its leadership position through market-making and over-the-counter trading businesses.

As Jump expands its business in the cryptocurrency field, its desire for profits is also growing. Jump has its own venture capital department, Jump Capital, which means the company can invest in a project while also acting as a market maker for its token. Although these departments appear to be independent, after the venture capital team was integrated into Jump Crypto in 2021, their related business discussions often connect to the same business team. An anonymous founder of an exchange mentioned that they had discussions with Jump's business staff regarding potential trades, but from an external perspective, it's difficult to distinguish the boundaries between Jump's venture capital and trading businesses. This would be completely unacceptable in traditional finance.

Jump is not the only market maker that requests options, but other market makers may only request one to two percent of the total token supply, while Jump often requests five percent or more. An anonymous founder who attempted to negotiate market making with Jump in 2021 said, "This gave them a lot of ammunition to wreak havoc."

Nevertheless, Jump still wields considerable influence. Before BlackRock applied for a Bitcoin spot ETF, Jump was seen as a symbol of traditional finance entering the cryptocurrency market, and Jump itself had enough strength to support its operations. Although Jump's practice of demanding options from project parties may be somewhat "shameless," as one trader said, many project parties are still willing to pay this price.

A project founder told us, "If you don't accept Jump's trades, you might even feel stupid. They are Jump, and their attitude is that you have to listen to them, or else get lost."

The Public Face

Although Jump often displays a strong style in trading, Kanav Kariya presents a more approachable image for the company, and his genius is crucial in the cryptocurrency field, which is rarely seen in traditional finance. The cryptocurrency industry is highly social, whether in the heated discussions on Twitter or behind the scenes in conference rooms, Jump needs a suitable frontman to assist in negotiations and trading, and Kariya is the perfect fit.

An anonymous trader from one of Jump's competitors said, "They are trying to connect with the younger generation, they are not stupid."

In the quirky and combative cryptocurrency industry, Kariya appears calm and authoritative. In some YouTube interviews, Kariya, although always looking tired, still appears deeply involved, speaking with a slight Mumbai accent and a thoughtful smile. He humbly stated that since all of Jump's trades are executed by algorithms, he has no foresight into the future price movements of the market—"Don't ask me what the price will be in the next 10 seconds."

Kariya's tired appearance is not surprising. During his years at Jump, he has been busy building trading systems and expanding the Jump Crypto team to over 150 people. At the same time, Jump Capital has also invested heavily in cryptocurrencies, supporting star projects like Solana.

In September 2021, just two months before Bitcoin reached its high of $69,000, Jump Crypto was officially established as an independent cryptocurrency department, with Kariya as its president. Bill DiSomma and Paul Gurinas are well-known figures in the Chicago financial industry, and Kariya is gradually becoming a rising star in the cryptocurrency field, attracting attention from various media outlets. In an interview with Bloomberg, Kariya mentioned an internal project of the company, saying, "I think you can't imagine how big it will be…"

Another significant event in Jump's public image is the hiring of Nathan Roth as the Chief Marketing Officer for Jump Crypto, who previously held the same position at Hinge and helped promote the well-known "Meet someone worth deleting the app for" campaign. Insiders revealed that Jump Crypto sees a16z as a role model and is trying to mold Kariya into a figure similar to "blockchain philosopher" Chris Dixon. Do Kwon's high-profile behavior may also be a strategy, as court documents show that one of Kariya's senior deputies privately exchanged emails with the head of public relations at Terraform Labs, discussing how to increase Kariya's exposure.

However, behind the scenes, according to Hunsaker, who blew the whistle to the SEC, Bill DiSomma still holds most of the power in Jump Crypto—"He (Bill DiSomma) leads the team, and Kariya is largely the public face of Jump Crypto."

Stablecoins, Not So Stable

Many of Jump Crypto's operations in the cryptocurrency field have attracted attention, but Terraform Labs is the "crown jewel" among them.

Jump Crypto never directly invested in Terraform in the form of traditional equity, but it is its primary market maker. At the same time, Kariya developed a strong interest in Kwon and established a somewhat reverent relationship with him. The founder of Terraform is only a few years older than him, but he has already made a name for himself in the bustling cryptocurrency community, becoming a figure on par with SBF and others.

Court documents revealed that Kariya and Kwon exchanged messages on the privacy-focused social platform Signal, covering business plans and casual conversations.

In February 2021, Kariya messaged, "I think by the end of this year, I also have to get a dog named Terra."

Kwon replied, "Call it Luna. Then it matches my dog."

Kwon also mentioned that Kariya could profit privately from the LUNA held by Jump: "Hope you can benefit from it… It's better than just making Bill DiSomma rich, right, haha."

The full details of the business cooperation between Jump and Terraform only surfaced several years later, in early 2023, when the SEC filed a lawsuit against Terraform and Kwon a few months after Terra's final collapse. The SEC made a severe accusation, stating that Jump did not act as a neutral market maker, and its revenue expectations were linked to options and the success of Terraform, and Jump could even participate in Terraform's internal operations, a situation that traditional financial market regulatory structures strongly avoid—Jump's spokesperson declined to comment on this.

Hunsaker participated in a Zoom meeting in May 2021, when UST first unpegged, and Kariya and DiSomma reached an agreement to defend UST, bringing in over a billion dollars in revenue for Jump and allowing Kwon to continue pretending that everything was normal. A year later, with UST's final collapse, Hunsaker believed the public had the right to know the truth—he himself lost about $200,000 in the matter.

Hunsaker first tried to disclose the truth to a KOL named FatMan through an anonymous Reddit post, but failed to attract attention, so he chose to report to the SEC. As later revealed in court testimony, Hunsaker disclosed everything to the lawyers.

However, the role that Jump played in the Terra collapse event and its aftermath for nearly a year remains unknown. Meanwhile, despite setbacks, Jump continues to operate. The cross-chain bridge protocol Wormhole, internally incubated by Jump, suffered a $325 million hack in February 2022, and Jump quickly intervened to fill the gap (the stolen funds were eventually recovered in 2023); in addition, Jump may have lost over a billion dollars in the final collapse of Terra, although this figure was never confirmed; after the FTX collapse, there were reports that Jump was stuck with nearly $300 million in funds on the exchange.

Kariya still faithfully plays the role of the public face of Jump Crypto and expressed confusion about the rampant fraudulent behavior exposed at FTX on a podcast. In a podcast in February 2023, Kariya said, "We are very angry."

But ultimately, Kariya had to step out of the public eye. In May 2023, the SEC filed new documents revealing that Jump was secretly supporting Terra's trading activities. Months later, Kariya and his boss DiSomma were both subpoenaed by prosecutors. They both invoked their Fifth Amendment rights.

Odaily Note: According to the Fifth Amendment of the U.S. Constitution, anyone has the right to refuse to answer questions that may incriminate themselves in legal proceedings. This is generally seen as a protection of the defendant's right against self-incrimination.

Is it time to exit the stage?

Jump is no longer the cryptocurrency giant it once was.

The cryptocurrency market has seen a strong resurgence in recent months (this article was written on July 11), but Jump has mostly been on the sidelines. Jump's engineers are quietly working on internal projects, including the new Solana client Firedancer. Jump continues to make venture investments, recently participating in Figure Markets, Coinflow, and Lava Network, but its activity has significantly decreased.

As its reputation has been severely damaged, people in the cryptocurrency industry have also noticed that Jump has gradually withdrawn from the token market-making business that once earned it billions of dollars, no longer engaging in the highly profitable trades it once did.

When the Bitcoin spot ETF was officially launched in January, even competitors like Jane Street entered the market, but Jump chose not to participate in market-making. At the same time, the company has divested two flagship projects, including Wormhole. An insider revealed that when Wormhole was launched in April 2024, its trading volume exceeded $1 billion, but the former parent company Jump was not hired as the market maker.

Although not charged with any wrongdoing, a heavy cloud of regulation looms over Jump. When the Department of Justice filed a lawsuit against Do Kwon in March 2023, it mentioned Jump's role in the 2021 unpegging event. Meanwhile, the CFTC is also investigating Jump's cryptocurrency business.

This cloud of scrutiny may even extend to some of Jump's peers. Bloomberg reported last year that prosecutors reviewed conversations in a group chat in May 2022 between employees of Jump and Jane Street about a potential rescue of UST, which ultimately did not happen. Both parties declined to comment at the time.

When Kariya attended an SEC hearing in 2021 about the events of that year, his appearance was barely recognizable compared to his early days at Jump. He looked older than his actual age, shocked and exhausted.

After Jump's scandals were exposed, many people compared Kariya to Do Kwon and SBF, but in reality, Kariya is not like his scandal-ridden peers. Founders, competitors, and investors all mention his intelligence and humility when talking about Kariya—"I don't think anyone sees him as a cunning person, I think he's a scapegoat."

A few days after news broke of the CFTC investigating Jump (June 24), the 28-year-old who rose from an intern to president announced that he would be leaving the company that made him famous. Kariya wrote on X, "Today marks the end of my personal journey, it is my last day at Jump."

Those close to Kariya revealed that both parties had actually been planning his departure for some time. Although Kariya claimed to continue to "participate" in Jump's portfolio upon announcing his departure, his future in the cryptocurrency field seems unclear.

The rise and fall of Jump in the cryptocurrency business serves as a warning. The company attempted to become a king in a poorly regulated field, leveraging its deep experience in traditional finance, trying to be everything—a Chicago-style high-frequency trading firm, a development studio, and a venture capital company, but ultimately "they still looked too much like a trading company," according to a competitor, who also said, "Their teeth were too sharp."

Despite suffering many losses, overall, Jump likely still made money in the cryptocurrency business. However, this is still a huge failure, as success for a high-frequency trading company depends on constantly pursuing the next trade, and Jump has missed out on many opportunities.

Finally, let's talk about the whistleblower James Hunsaker. He left Jump in February 2022 and co-founded his own cryptocurrency project, Monad, with a former colleague, completing a $225 million financing in April, valuing the company at $3 billion, with no participation from Jump.

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