Some parties view cryptocurrencies as securities as it is possible to issue them like stocks, but others classify them as commodities. If Korean prosecutors find the Terra assets are securities, TerraForm Labs and Do Kwon will face new legal problems.
The collapse of the Terra (LUNA) ecosystem seems to have faded from the spotlight over the last month. However, South Korean prosecutors plan to reopen the case while investigating whether the LUNA assets are securities.
The Financial and Securities Crime Joint Investigation Team of the Seoul Southern District Prosecutors Office reportedly contacted cryptocurrency experts and financial authorities. South Korean prosecutors seek to determine whether LUNA and other digital assets on Terra qualify as securities.
Stocks and debt securities are among the marketable financial assets that specialists describe as securities. There has been a lengthy debate within the cryptocurrency industry about whether virtual assets are stocks.
Financial regulators have reiterated the question of whether crypto assets fall within the category of securities. For example, cryptocurrency exchange network Ripple has faced similar legal troubles for years.
Since it is possible to issue cryptocurrencies like stocks, some parties view them as securities. However, others classify them as commodities due to their decentralized nature.
TerraForm Labs Faces Legal Battles in Korea and the United States
If Korean prosecutors find that the Terra assets are securities, TerraForm Labs and its founder Do Kwon will face new problems. The authorities will accuse the company and its executives of violating the Capital Market Act.
The decision by the officials will also be crucial for lawmakers to define a regulatory framework for the South Korean cryptocurrency industry. TerraForm Labs already faces legal problems due to the collapse of the Terra network in May, when investors lost USD 60 billion in assets.
After that incident, many people started to accuse the company of fraud and tax evasion. In July, prosecutors searched the home of Daniel Shin, the co-founder of TerraForm. Other major cryptocurrency companies related to Terra have also undergone extensive investigation.
Nobody knows exactly where the CEO of Terra is, but prosecutors ordered a notification upon his arrival in Korea. That will allow relevant authorities to know when Do Kwon enters the country.
The arrest warrant for Do Kwon includes co-founder Nicholas Platias and employee Han Mo, among the other three representatives of TerraForm.
That news on the investigation into TerraForm Labs by Korean prosecutors comes as the US SEC deepens its probe into it. The federal government agency is scrutinizing the Mirror protocol, the DeFi platform of the company.
TerraForm Labs has not registered Mirror Protocol in the United States, which led to the investigation by the SEC. The agency investigates whether the company has violated consumer protection laws by trading troubled currencies in the country.
Meanwhile, Terra (LUNA) is trading at around USD 2.88 and has accumulated a 34.9% loss over the last 24 hours. While its daily trading volume is above USD 1.35 billion, its market capitalization is about USD 472.03 million, according to CoinGecko.
By Alexander Salazar
