一万字深挖Jump往事，暴跌元凶：实习生4个月升任总裁

原文 | 《财富》

编译自Odaily星球日报（ @OdailyChina )

译者：Azuma（ @azuma_eth )

Editors note: This is an in-depth article published by Fortune on July 11. Before the article was published, the U.S. Commodity Futures Trading Commission (CFTC) had begun investigating Jump, and Jumps own business conditions had also shown signs of dramatic changes. Its face, Kanav Kariya, chose to resign shortly afterwards.

A month later, rumors about Jumps possible collapse have intensified, and its selling behavior has accelerated the markets plunge. In this article, perhaps we can find some clues to Jumps true status through its business development history in the cryptocurrency field.

The intern who was promoted to the president

Jump Crypto always conducts business communications through Zoom meetings. In May 2021, a group of employees gathered in a Zoom conference room to discuss a growing crisis.

Jump Trading, a Chicago-based financial firm that made its name through high-frequency trading during the Flash Boys era at the turn of the century, has since moved deeper into the volatile world of cryptocurrencies.

Algorithmic stablecoin Terra (UST) was once the most popular project in the cryptocurrency field, and Jump can be regarded as its invisible partner. Terra aims to maintain a peg of $1 through a complex algorithmic mechanism related to its native cryptocurrency LUNA, and Jump will coordinate this algorithm on the back end to support UST through transactions – however, despite the confidence of Terras founder Do Kwon, UST still decoupled.

Jump had the opportunity to safely make millions of dollars through a partnership agreement with Terraform Labs (Terra’s developer), but Terra was likely to collapse quickly. Jump co-founder Bill DiSomma didn’t want to give up on this “pet project” at the time, so he joined the Zoom meeting to try to find a better solution.

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

Kariya said during the meeting, “I talked to Do Kwon and they agreed to give us options.”

What happened next could have truly changed the course of the cryptocurrency industry. According to court documents, over the next week, Jump secretly purchased large amounts of UST to create a false demand boom to pull the tokens value back to $1. At the same time, Kwon agreed to deliver up to 65 million LUNA (options) to Jump at $0.4, even though LUNAs price on the secondary market was over $90 at the time.

According to a later announcement by the U.S. Securities and Exchange Commission (SEC), Jump made a full $1 billion from this agreement alone. A few months later (September 2021), Kariya was promoted to the president of Jump Crypto at light speed.

On the other hand, this operation restored USTs anchoring in appearance, and Kwon began to boast on X (then Twitter) that UST had achieved natural recovery. According to court records, a Terra employee once privately admitted in a text message: If Jump hadnt intervened, we might really be finished. Haha.

However, this controversial savior act could only delay but not change Terras fate. A year later, when UST broke free again, Jump was powerless.

In May 2022, UST suffered a death spiral, with $40 billion evaporating in just a few days. Countless investors lost their life savings in this incident . Crypto communities such as Twitter and Discord were filled with voices begging for compensation, and some people threatened to commit suicide. This collapse subsequently triggered a chain reaction in the entire cryptocurrency market, and even indirectly led to the collapse of FTX in November 2022, and ultimately caused regulators to pay close attention to the risks of the industry.

However, nobody knew Jump was behind UST until 2023, when the SEC filed a major fraud lawsuit against Terraform Labs and Kwon based in part on the testimony of James Hunsaker, a whistleblower from Kariya’s team. Terraform Labs and Kwon reached a $4.5 billion settlement with the SEC in June, but much of that money may not be paid because Terraform filed for bankruptcy earlier this year. Kwon, who is still facing criminal charges from the U.S. Department of Justice (DOJ) and is awaiting extradition from Montenegro, has consistently denied any wrongdoing, and Terraform did not respond to our request for comment.

Although Jump has not been charged with any crime, their dealings with Kwon clearly affected their reputation — trade secrets were exposed in the most disgraceful of cases. The whistleblower testimony released by the New York federal court in March 2024 can be seen as a major sign of setbacks for Jump’s involvement in the cryptocurrency industry.

Kariya declined to comment for this story, and a Jump spokesman declined to make any senior executives available for interviews or comment. We spoke to more than two dozen former Jump employees, competitors, and industry traders, many of whom spoke only on condition of anonymity for fear of retaliation. Yet even as Jump’s activity in the cryptocurrency space has waned, it remains one of the most influential players in the industry, with hundreds of millions of dollars in control.

On the surface, Jump’s “legend” story fits the narrative style of the blockchain industry, but Jump is unique in that it is already a well-known “giant” in the traditional financial field. It once thought it could control this emerging market, just like an adult entering a child’s game and walking away with billions of dollars, but in the end it got the same painful lesson as many other self-proclaimed smart people.

A former Jump employee told us: “The history of finance is written with the blood of investors.”

The Bombay Prodigy and the Windy City Giant

Jump Trading has become a fixture in Chicago’s historic financial scene since its founding in 2001, but Kariya hadn’t heard of the company when he enrolled at the University of Illinois in 2014 at the age of 18. Growing up in a middle-class family in Mumbai, India, Kariya chose the University of Illinois after reading a list of the top undergraduate engineering schools in the U.S. on the news.

The cold winters in Champaign did not deter Kariya, who, having loved playing video games and watching war movies as a child, chose to major in computer science in college – unlike many of his future colleagues, who often learned to program as children. Kariya later explained in a podcast that he knew he wanted to come to the United States after visiting Disneyland and touring several universities when he was 13 years old – the infrastructure and the quality of education looked very attractive… all the university campuses were equipped with computers.

Just a few years later, Kariya landed an internship at Jump Trading, quickly rising through the ranks as cryptocurrency ushered in its golden age. Today, Kariya’s name is almost as well-known in the cryptocurrency industry as Jump itself, though that’s in part because other Jump executives have long avoided the spotlight, pushing Kariya to the forefront.

In 2021, Kariya, who is only 25 years old, has become the president of the newly established Jump Crypto department. His typical face with black hair and a goatee always appears in various technology star lists and cryptocurrency conferences, looking like a cowboy.

At the University of Illinois, Jumps name does not appear on the campus recruitment list, and they do not post recruitment information on the bulletin board. Jump recruits graduates and students like Kariya, preferring to do so through private referrals. Jumps two founders, Bill DiSomma and Paul Gurinas, both started their careers at the Chicago Mercantile Exchange (CME), and before that they both studied at the University of Illinois.

While at the CME, traders would jump and shout to bid prices (which inspired the name Jump), DiSomma and Gurinas watched the online trading revolution engulf the world they knew, and they were determined to get a piece of the action — they founded their own company, Akamai, in 1999 and renamed it Jump in 2001.

As Michael Lewis describes in Flash Boys, his book about the rise of high-frequency trading, firms like Jump (and its competitors, such as Jane Street and Citadel Securities) place a premium on keeping their strategies secret — their advantage lies in their technology, their ability to complete trades faster than others or spot market efficiencies, and they protect these strategies almost fanatically.

John Lothian, a veteran of Chicagos financial community, recalls signing a nondisclosure agreement just to get through the front door of Jumps headquarters in the Montgomery Ward Building on the Chicago River, even though he was there only to ask Jump to sponsor a community event, which Jump politely declined.

“They just won’t let people into the office because it doesn’t fit their confidentiality principles,” Lothian told us.

Toys Market

Jumps involvement in the cryptocurrency industry also reflects the companys culture of secrecy. Some former employees and people familiar with the companys operations revealed that Jump only tentatively invested in the field at the beginning, and used the cryptocurrency business as a testing ground for interns to try, while isolating this part of the business from the main business.

By the end of 2015, Jump had set up a research and development office at its founder’s alma mater, which funded research projects and worked with professors to explore cutting-edge technologies, such as using VR helmets to simulate trading environments. They also hired college students as interns and discovered potential talent through word of mouth. Kariya was able to join through a friend’s recommendation.

Jump has always faced a dilemma in training new people: the company needs to test the real ability of potential employees, that is, whether they can find subtle opportunities in the financial markets and turn them into algorithmic trading models. At the same time, Jump cannot hand over the most critical strategies and billions of dollars of capital to temporary employees.

Cryptocurrency offers a perfect solution, with a market that has its own tradable assets, exchanges, and characteristics, while being sufficiently isolated from Jump’s stock and bond markets that they do not pose a threat to each other.

Its a bit like a toy market, an anonymous former Jump employee told us.

For the young people working in cryptocurrency at Jump, they are not completely out in the cold. In fact, DiSomma himself is very interested in the vision of cryptocurrency to create a decentralized market. Cryptocurrency supporters believe that blockchain technology can completely eliminate middlemen, such as brokers and clearing houses. As a pioneer of the online trading revolution, DiSomma has witnessed the development of the trading market from the crowded halls of CME to the Internet model, and he is looking forward to the next paradigm shift.

So when Kariya joined Jump as an intern in January 2017, he was assigned by the company to build early cryptocurrency trading infrastructure with few management restrictions. Kariya mentioned in a podcast in January 2023: We were free to do our own thing… It was like working in a completely closed bubble.

The subsequent story is that the bubble kept getting bigger. In the year when Kariya interned, Bitcoin achieved its first major upward wave breakthrough, growing from less than $1,000 at the beginning of 2017 to nearly $20,000 in December. According to a former employee, Jumps cryptocurrency team gradually became more important within the company and became one of the best performing teams.

One notable change was that cryptocurrencies were no longer just a toy for interns. Soon after the Bitcoin bubble finally burst in 2018, Kariya graduated and joined the Jump team full-time, and his rise had begun.

Market Maker Giant

There is a veil of secrecy surrounding high-frequency trading firms like Jump, whose primary form of trading is known as “market making.”

When people go to an exchange, they need a counterparty to trade with, whether they are buying or selling. Market makers act as middlemen in this process, competing to provide the best quotes. For market makers, the spread on each trade may be small – maybe just a few cents per share – but in an algorithm-driven system, it is a very profitable business.

In the traditional financial industry, market making is a strictly controlled business, and supervision needs to ensure that there is no conflict of interest. Market makers do not work directly with companies that issue stocks, but with exchanges under the supervision of regulators. Different businesses such as market making and venture capital are usually physically separated to avoid any possibility of insider trading or market manipulation.

The cryptocurrency industry is completely different. As a new “wild industry”, it is not restricted by the cumbersome rules that have been established for decades. Michael Selig, an attorney at Willkie Farr Gallagher, a law firm specializing in digital asset services, said: “In the cryptocurrency field, you will not be subject to that kind of direct regulation.”

Market makers in the cryptocurrency industry don’t just work with exchanges; they sign agreements directly with projects, 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.

To do this, the project will lend the market maker a large amount of tokens so that they can start trading. Some market makers will also negotiate with the project to ask the latter to give them an option, which gives the market maker the right to buy a large amount of tokens at a significant discount if the project goes well. Selig said that this reverse structure in the cryptocurrency industry (market makers work with projects instead of exchanges) makes sense to a certain extent because projects need to achieve higher trading activity for tokens.

This particular model enables a situation that would never be allowed in traditional finance – while market makers can still make money from the spread between transactions, the huge revenues usually come from those profitable options.

For companies like Jump, being a market maker for a project means they can have nearly unlimited profit margins without taking on real wealth risk. “ If you work at Jump, you get to decide which tokens will succeed, ” one cryptocurrency exchange founder told us anonymously.

Although other companies from traditional finance have also begun to get involved in the crypto field, such as Jumps old rival DRW in Chicago, which established a blockchain department called Cumberland in 2014, Jump has quickly established its leading position through businesses such as market making and over-the-counter trading.

As Jump expands its business in the cryptocurrency space, its desire for returns is growing. Jump has its own venture capital arm, Jump Capital, which means the company can invest in a project while making a market for a token. Although these departments are ostensibly independent of each other, after the venture capital team was integrated into Jump Crypto in 2021, business conversations between the two are often linked to the same business team. The anonymous founder of the above-mentioned exchange said that he had contacted Jump’s business staff when discussing potential transactions, but from the outside, it was impossible to distinguish the boundary between Jump’s venture capital business and trading business. In traditional finance, this is completely unacceptable.

Jump isn’t the only market maker to ask for options, but while other market makers might only ask for one or two percentage points of the total token supply, Jump often asks for five percentage points or more. “It gives them a lot of ammunition to sabotage,” said an anonymous founder who tried to negotiate market making with Jump in 2021.

Despite this, Jump still has a serious 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 has enough strength to support its business. Even though Jumps request for project parties to grant options is somewhat shameless, a trader said that many project parties are still willing to pay the price.

“ You might even feel stupid if you don’t want to take a deal from Jump,” one project founder told us. “They are Jump, and their attitude is you have to listen to them or get out.”

The person who was pushed to the front

Although Jump often presents a strong style in transactions, Kanav Kariya presents a more approachable image for the company, and his genius is extremely important in the field of cryptocurrency, which is rarely seen in the traditional financial industry. Cryptocurrency is a highly social industry, whether in the hot discussions on Twitter or behind the scenes in the meeting room, Jump needs a suitable facade to assist in negotiations and transactions, and Kariya is the right person.

“They’re trying to fit in with the young people,” said a trader at a Jump competitor who spoke on condition of anonymity. “They’re not stupid.”

In an industry full of eccentric personalities and bellicosity , Kariya is calm and authoritative. In some YouTube interviews, Kariya always looks tired but still engaged, speaking with a slight Bombay accent and a thoughtful smile. He once modestly said that because all Jumps trades are driven by algorithms, he has no foresight about the future direction of the market – Dont ask me what the price of anything will be in the next 10 seconds.

It’s not surprising that Kariya looks tired. During his years at Jump, he was busy building trading systems while also expanding the Jump Crypto team to over 150 people. At the same time, Jump Capital also poured a lot of resources into cryptocurrencies, backing star projects like Solana.

In September 2021, just two months before Bitcoin reached a high of $69,000, Jump Crypto was officially established as an independent cryptocurrency division, with Kariya as president. Bill DiSomma and Paul Gurinas are well-known in the Chicago financial industry, while Kariya is gradually becoming a rising star in the cryptocurrency field and has become the subject of various media reports. In an interview with Bloomberg, Kariya talked about an internal project of the company: I dont think you can imagine how big it will be…

Another sign that Jump values its public image is that Jump Crypto hired Nathan Roth as its chief marketing officer, who previously held the position at Hinge and helped promote the well-known Meet someone worth deleting the app for campaign. People familiar with the matter revealed that Jump Crypto regards a16z as a role model and tries to make Kariya a figure similar to blockchain philosopher Chris Dixon. Do Kwons high-profile behavior may also be a strategy. Court documents show that one of Kariyas senior deputies privately exchanged emails with the head of Terraform Labs public relations department to discuss how to increase Kariyas exposure.

However, behind the scenes, according to Hunsaker, who whistleblower to the SEC, Bill DiSomma still holds most of the power in Jump Crypto – He (Bill DiSomma) is leading that team, and Kariya is very much the public face of Jump Crypto.

Stablecoins are not stable

Jump Crypto has made a lot of headlines for its cryptocurrency operations, but Terraform Labs is the crown jewel.

Jump Crypto has never directly invested in Terraform in the form of traditional equity, but it is its main market maker. At the same time, Kariya has developed a keen interest in Kwon and has established a relationship with him that is tinged with admiration. The founder of Terraform is only a few years older than him, but he has become a well-known figure in the tumultuous cryptocurrency community, becoming a figure on par with bigwigs such as SBF.

Court documents revealed that Kariya and Kwon would send messages on the privacy-oriented social platform Signal, ranging from business plans to small talk.

In February 2021, Kariya sent a message saying: “I think I will have to get a dog named Terra by the end of this year.”

Kwon responded: Call it Luna. That way it matches my dog.

Kwon also mentioned that Kariya could profit privately from Jumps holdings of LUNA: I hope you can benefit from it… Its funnier than just making Bill DiSomma rich haha.

The full details of the business partnership between Jump and Terraform did not emerge until 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 serious allegation that Jump did not act as a neutral market maker, that its revenue expectations could be tied to Terraform’s success through options, and that Jump could even participate in Terraform’s internal operations, which is exactly the conflict of interest that the regulatory structure of traditional financial markets is very keen to avoid. A spokesperson for Jump declined to comment.

Hunsaker, the whistleblower, was present at the May 2021 Zoom meeting when UST first broke free and Kariya and DiSomma struck a deal to defend UST, which netted Jump more than a billion dollars and allowed Kwon to continue pretending everything was fine. A year later, with UST finally collapsing, Hunsaker believes the public has a right to know the truth — and he himself lost about $200,000 in the matter.

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

Even so, Jump’s exact role in Terra’s collapse remains unknown for nearly a year. Meanwhile, Jump has continued to operate despite setbacks. Wormhole, a cross-chain bridge protocol incubated internally by Jump, suffered a $325 million hack in February 2022, and Jump quickly stepped in to fill the gap (the stolen money was eventually recovered in 2023); in addition, Jump may have lost more than $1 billion in Terra’s final collapse, although that figure has never been confirmed; after the FTX collapse, there were reports that Jump was trapped with nearly $300 million in funds on the exchange.

Kariya still faithfully plays the role of Jump Cryptos face and has expressed confusion on podcasts about the rampant fraud exposed by FTX. In a podcast in February 2023, Kariya said: We are angry.

But eventually, Kariya had to withdraw from the public eye. In May 2023, the SEC filed new documents, revealing that Jump was a trading firm secretly supporting Terra. A few months later, Kariya and his boss DiSomma were both subpoenaed by prosecutors. They both exercised their Fifth Amendment rights.

• Odaily Note: According to the Fifth Amendment to the U.S. Constitution, anyone has the right to refuse to answer questions in legal proceedings that might expose him or her to criminal liability. This is generally seen in law as a right to protect the defendant from being forced to incriminate himself or herself.

Is it time to exit?

Jump is no longer the cryptocurrency giant it once was.

The cryptocurrency market has rebounded strongly in recent months (this article was written on July 11), but Jump has mostly been on the sidelines. Jump engineers are still quietly working on internal projects, including Solanas new client Firedancer. Jump is also continuing to invest in venture capital, recently participating in Figure Markets, Coinflow and Lava Network, but the activity has been much less than before.

As its reputation took a hit, people in the cryptocurrency industry noticed that Jump had gradually withdrawn from the token market-making business that had made it billions of dollars and no longer engaged in the kind of lucrative trading that it once did.

When the Bitcoin spot ETF was officially launched in January, even competitors such as 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. A person familiar with the situation revealed that when Wormhole was launched in April 2024, the trading volume exceeded US$1 billion, but it did not hire Jump, its former parent company, as a market maker.

Although it has not been charged with any crime, Jump still has a heavy regulatory cloud hanging over it. When the Department of Justice filed a lawsuit against Do Kwon in March 2023, it mentioned Jumps role in the 2021 de-anchoring incident. At the same time, the CFTC is also investigating Jumps cryptocurrency business.

The cloud could even extend to some of Jump’s peers. Bloomberg reported last year that prosecutors reviewed conversations between Jump and Jane Street employees in a May 2022 group chat about a possible bailout of UST that ultimately did not happen. Both parties declined to comment at the time.

When Kariya appeared before the SEC for the 2021 hearing, his face was unrecognizable from his early days in Jump. He looked older than his years, shocked and exhausted.

After the Jump scandal broke, many people compared Kariya to Do Kwon and SBF, but Kariya is actually not like his scandal-ridden peers. Founders, competitors and investors all mentioned his intelligence and humility when talking about Kariya – I dont think anyone thinks he is a cunning person, I think he is a scapegoat.

A few days after news of the CFTC investigation into Jump broke (June 24), the 28-year-old who rose from intern to president announced that he would leave the company that turned him into a celebrity. Today marks the end of a personal journey for me. Its my last day at Jump, Kariya wrote on X.

People close to Kariya revealed that both parties had actually planned his departure a long time ago. Although Kariya claimed that he would continue to participate in Jumps portfolio when announcing his departure, his future in the crypto field did not look clear.

Jump’s rise and fall in the crypto space also serves as a cautionary tale. The company tried to become king in an underregulated field with its deep experience in traditional finance, trying to be everything – a Chicago-style high-frequency trading firm, a development studio and a venture capital firm, but in the end they are still too much like a trading company, said one of Jumps competitors. They also said: Their teeth are too sharp.

Despite the many losses, Jump has likely made money in the cryptocurrency business overall. But it’s still a huge failure, and for a high-frequency trading firm whose success depends on constantly chasing the next trade, Jump has missed many opportunities so far.

Finally, lets talk about the whistleblower James Hunsaker. He left Jump in February 2022 and founded his own cryptocurrency project Monad with a former colleague. They completed a $225 million financing in April, with a valuation of $3 billion, and Jump did not participate.

This article is sourced from the internet: Ten thousand words digging into the past of Jump, the culprit of the plunge: an intern was promoted to president in 4 months

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