Regulators around the world have been carrying out investigations against Terraform Labs, Founder Do Kwon, and other related parties. Earlier this year, Terra [LUNA] and its native stablecoin UST, shed most of their value. This resulted in massive losses for investors. The same had a ripple effect on the broader ecosystem, and the market—on a whole—became choppy.
Per the latest development, South Korean authorities have issued a warrant for Do Known, indicating that they intend to arrest the Terra founder. A recent Bloomberg report noted:
“The court in Seoul issued a warrant for Do Kwon and five others, according to a text message from the prosecutor’s office.”
Capital Market Act violations by Terra?
Here it is worth recalling that a recent local media house had reported that South Korean authorities were investigating if the Terra ecosystems’ had characteristics of securities. Notably, the Terra investigation team of the Seoul Southern District Prosecutors’ Office was judging the securities properties of Luna by referring to overseas cases.
Prosecutors were reportedly listening to various opinions by summoning virtual asset experts. They also used financial authorities like the Financial Supervisory Service as reference persons.
They reported yesterday that if the prosecution finds that Luna and Terra have securities properties, they can be charged with violating the Capital Market Act for unfair trade such as market price manipulation. Confirming the reason for the warrant issuance, Bloomberg noted,
“A local newspaper earlier reported that the warrant was related to a violation of capital market rules.“
Per Lawyer Kim Jeong-Cheol of Woori Law Firm,
“Currently, virtual assets are not recognized as securities, so the Capital Market Act does not apply. In a situation where the discussion has progressed considerably, there is a high possibility that the Luna-Tera case will become Korea’s ‘leading case’ no matter what charges are indicted.”
Furthermore, Kim Dong-hwan, Director of the blockchain advisory firm Blitz Labs, said,
“In 2018, the investigative authorities only investigated Coinone’s margin trading allegations, but since then, no one has done anything. Therefore, if the public authorities look into it, it will inevitably have a debilitating effect.”
Until now, it seemed that financial authorities were taking a cautious stance against Terra and its executive. However, the issuance of the latest arrest warrant hints toward a flipped stance.