Authorities from all across the world have been looking into Terraform Labs, its founder Do Kwon, and other connected parties. Terra [LUNA] and its native stablecoin UST lost the majority of their value earlier this year. Investors suffered enormous losses as a result of this. The market as a whole got tumultuous as a result of the same having a knock-on effect on the larger ecosystem.
The most recent development indicates that South Korean officials aim to detain Terra’s creator Do Known by issuing a warrant for his arrest. According to a recent Bloomberg report:
“The court in Seoul issued a warrant for Do Kwon and five others, according to a text message from the prosecutor’s office.”
Terra in troubled waters
It is important to remember that recent local media reports claimed that South Korean authorities were looking at whether the Terra ecosystems had securities-like traits. Notably, the Seoul Southern District Prosecutors’ Office Terra investigative team was evaluating Luna’s securities capabilities using precedents from other countries.
Authorities reportedly called in virtual asset specialists to hear different points of view. Additionally, they cited the Financial Supervisory Service and other financial authorities as references.
They stated in their report from yesterday that Luna and Terra could face charges of breaking the Capital Market Act for unfair trade, such as market price manipulation, if the prosecution determines that they have securities properties. According to Bloomberg, who confirmed the trigger for the warrant’s issue,
“A local newspaper earlier reported that the warrant was related to a violation of capital market rules.“
According to Kim Jeong-Cheol, an advocate from 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.”
In addition, Kim Dong-hwan, Director of blockchain consulting business Blitz Labs, stated,
“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.”
It appeared up until this point that Terra and its CEO were being cautiously viewed by banking authorities. The issuing of the most recent arrest warrant, however, suggests a change in position.