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Luna Token’s Annoyed Legal Status Dogs Prosecutors Who Kwon . Chase

South Korean prosecutors are trying to build a case against Do Kwon over the destruction of his $60 billion crypto project…

South Korean prosecutors trying to build a case against Do Kwon over the destruction of his $60 billion crypto project made a striking confession this month: The latest court decision appears to bolster his defense.

They made the comment after a judge rejected a request to detain an individual linked to Kwon’s collapsed Terraform Labs ecosystem. Part of the judge’s reasoning was that it’s debatable whether the individual has violated the country’s Capital Markets Act, as prosecutors allege — a major charge that Kwon also faces, which he has dismissed.

The development highlights disputes over whether the now-collapsed TerraUSD and Luna tokens that Kwon created can be regulated as securities under a law developed for assets such as stocks and bonds. South Korea, as in the US and elsewhere, has yet to implement a legal code for crypto to bolster its status.

“Korean law allows a more limited number of securities than in the US,” said Kwon Ohoon, a lawyer at Cha & Kwon Law Offices in Seoul. There are six categories under the law, and the question is whether Terraform Labs’ tokens fall into a group known as investment contracts, he said.

Investment contract securities, rare in South Korea, are defined as giving a contractual right to profit or liability for losses from a company run by a third party. Kwon, Cha & Kwon’s attorney, said the judge who denied the arrest request seemed unsure whether the tokens would qualify for this statute.

TerraUSD was a stablecoin intended to have a constant value of $1 through a complex mix of algorithms and merchant incentives involving Luna, whose price was to increase as the Terraform Labs network became more valuable.

The building collapsed in May, contributing to a $2 trillion loss 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 face arrest warrants for, among other things, violating the capital market law.

Kwon’s whereabouts were subsequently unclear, but he has denied any accusations or being on the run. Terraform Labs has said there is no reasonable basis for accusing Kwon of violating capital markets laws, as Luna does not qualify as a security.

Whether securities laws will legislate on crypto is a question that officials worldwide are asking about digital tokens. In the US, for example, Gary Gensler, chairman of the Securities & Exchange Commission, is trying to gain authority over the sector.

“The move to regulate cryptocurrencies through securities-related laws is a global trend and South Korea will follow that path,” said Kang Seong-hoo, the head of the Korea Digital Asset Service Provider Association and former director general at the South. Korean government. Ministry of Finance.

The Seoul Prosecutor’s Office said it is making “best efforts” to investigate the matter, adding “the fact that there is a legal argument does not mean that the investigation cannot proceed.” A Terraform Labs spokesperson reiterated his position in a statement that neither Kwon nor the company had “criminally violated” the Capital Markets Act.

‘Hottest topic’

Aside from the in-depth debate over the legal status of crypto, Kwon is also facing other charges, though the prosecutor’s office has not specified exactly what they are. Some of the estimated 280,000 people in South Korea who bought Luna are also pushing for recovery.

The Terraform Labs project exploded just as the government of President Yoon Suk Yeol came to power in May and revived a financial investigation unit in the prosecution that had been disbanded by the previous government.

The Terraform Labs turmoil was the “hottest topic” at the time, becoming the first case for a resuscitated team to be in the spotlight, said Kim Hyoung Joong, a professor at Korea University Graduate School of Information Security and president of the Korea Fintech Society. .

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