Luna Token’s Vexed Legal Status Dogs Prosecutors Chasing Kwon
South Korean prosecutors trying to build a case against Do Kwon over the $60 billion wipeout of his crypto project made an eye-catching admission this month: the latest court decision seems to support his defense.
They made the comment after a judge rebuffed a request to detain a person linked to Kwon's collapsed Terraform Labs ecosystem. Part of the judge's reasoning was that it's debatable whether the individual had violated the nation's Capital Markets Act as prosecutors claim -- a key charge Kwon also faces, and which he has rejected.
The development highlights disputes over whether the now-collapsed TerraUSD and Luna tokens Kwon created can be regulated as securities under an act developed for assets like stocks and bonds. South Korea, as in the US and elsewhere, has yet to implement a legal code for crypto to cement its status.
“Korean law allows for a more limited range of securities than in the US,” said Kwon Ohoon, a lawyer at Cha & Kwon Law Offices in Seoul. There are six categories under the act and the question is whether the tokens from Terraform Labs 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 profits or liability for losses from a venture run by a third party. Kwon, the lawyer at Cha & Kwon, said the judge who denied the detention request appeared uncertain if the tokens qualify under this statute.
TerraUSD was a stablecoin that was meant to have a constant $1 value via a complex mix of algorithms and trader incentives involving Luna, whose price was meant to go up as the Terraform Labs network became more valuable.
The edifice crashed in May, contributing to a $2 trillion rout in digital
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