(Bloomberg) — South Korean prosecutors are trying to build a case against Do Kwon for his $60 billion crypto project that got involved this month: the new court decision is support his statement.
The news came after a judge rejected a request to arrest a man linked to the failed Terraform Labs ecosystem. Part of the jury’s opinion was a dispute over whether the man violated the nation’s Securities Markets Act as alleged by prosecutors — a serious charge Kwon faces, and which he has denied.
The development highlights the controversy over whether TerraUSD and Luna tokens created by Kwon can be classified as securities under a law developed for assets such as stocks and bonds. South Korea, like the US and elsewhere, has yet to implement a legal code for crypto to ensure its legitimacy.
“Korean law allows fewer types of banks than the US,” said Kwon Ohoon, an attorney at Cha & Kwon Law Offices in Seoul. There are six sections under the law and the question of whether the awards from Terraform Labs fall into a group called investment contracts, he said.
Investment contract banks, which are rare in South Korea, are defined as giving a contractual right to receive profits or liability for losses from an enterprise managed by a third party. Kwon, the attorney for Cha & Kwon, said the judge denied the detention request because it was unclear if the evidence was subject to this law.
TerraUSD is a stablecoin that is meant to maintain its $1 value through a complex combination of algorithms and incentives from traders based on Luna, which is meant to increase in value as it becomes more available. the cost of the Terraform Labs network.
The building collapsed in May, involving a $2 trillion fall in digital assets. Lawyers for Luna investors filed complaints alleging that Do Kwon engaged in fraud and illegal fundraising. Prosecutors said last month that Kwon and five others were being held on charges including violating the jewelry trade law.
Kwon’s whereabouts next are unclear but he has denied any wrongdoing or is on the run. Terraform Labs said there was no valid reason to accuse Kwon of violating capital markets laws because Luna did not qualify as a security.
The security regulation that holds crypto is a question of the world leaders of digital tokens. In the US, for example, Securities & Exchange Commission Chairman Gary Gensler is trying to have control over the sector.
“The move to regulate cryptocurrencies through security-related regulations is a worldwide trend, and South Korea is set to follow suit,” Kang Seong said. -hoo, head of the Korea Digital Asset Service Provider Association and former CEO in South Korea. Ministry of Finance.
The prosecutor’s office in Seoul said it was working hard to investigate the case, adding that “just because there is a legal dispute does not mean that the investigation cannot be carried out.” A Terraform Labs spokesperson reiterated in a statement that he believes Kwon and the company did not “seriously violate” the Securities Market Act.
Controversially over the legality of crypto, Kwon also faces other charges although the prosecutor’s office has not confirmed what they are. Some of the 280,000 people in South Korea who bought Luna are also demanding repairs.
The Terraform Labs project exploded when President Yoon Suk Yeol took office in May, reviving a financial investigation unit in the prosecutor’s office that was abolished by the government of before.
The Terraform Labs scandal was the “hottest project at the time” and would be the first case of a recovery group under the spotlight, said Kim Hyoung Joong, a professor at the University’s Graduate School of Korea Information Security and chairman of the Korea Fintech Society. .
“Kwon’s case and the political context in Korea are connected,” Kim said.
–With help from Joanna Ossinger and Sangmi Cha.
(Updates and comments from Terraform Labs in paragraph 11.)
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