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Terra Spokesman Argues ‘Luna Classic has Never Been a Security’ Amid Legal Trouble

2 mins
Updated by Kyle Baird
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In Brief

  • South Korean prosecutors may be 'overreaching their authority' claims Terra.
  • A Terra Labs spokesperson accused the case of being 'highly politicized.'
  • The company has refuted the allegation by stating that Luna is not a security.
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Terraform Labs suggested that South Korean prosecutors may be ‘overreaching their authority’ arguing that Luna Classic isn’t legally a security in a recent exchange with The Wall Street Journal.

Soon after Terra chief Do Kwon denied ducking Interpol ‘Red Notice,’ a company spokesperson accused the case of being ‘highly politicized.’

‘Unfair and highly politicized’

“We believe that this case has become highly politicized and that the actions of the Korean prosecutors demonstrate unfairness and a failure to uphold basic rights guaranteed under Korean law,” the spokesman told the paper.

Be[In]crypto recently reported that Terra co-founder Daniel Shin has been wrapped in as one of the key witnesses at South Korea’s National Assembly. With that, Ji-Yun of Terra’s blockchain validator DSRV Labs has also been roped in as a witness as the stablecoin collapse is likely to take center stage in this year’s audit.

Investor money totaling close to $40 billion was lost when Terra failed earlier this May. The crisis soon affected significant companies, like Three Arrows Capital, BlockFi, and Celsius while crushing retail investors in the process with exposure to Terra. Since then, Terraform Labs and its top officials have been facing several allegations of fraud and securities law violations.

Kwon’s location still unknown

With co-founder Kwon’s whereabouts unknown, the company plans to keep it this way. The firm’s spokesman said, “Do Kwon’s location has been a private matter for months due to ongoing physical security risks to him and his family,” highlighting attempted break-ins at his premises.

TerraUSD (UST) Do Kwon

However, on being asked about the matter, South Korean prosecutors told the paper that they would not respond to “every unilateral claim made by the fleeing suspect,” adding that Kwon should appear before the authority to “fully disclose his position and cooperate with the investigation.”

Luna Classic security status could lead to further litigation

It has been previously reported that Kwon is being investigated by the Seoul Southern District Prosecutor’s Office in Korea to see if Ponzi scheme charges may be brought against him. Last week, the watchdog issued a warrant for the arrest of Kwon and five additional executives reportedly in connection to violation of capital market regulations.

However, Terraform Labs has countered by stating that Luna is not a security, and the law does not apply to it. The Terraform Labs spokesman claimed that the argument thus bring Kwon and his company in the clear.

Terraform Labs’ allegation is based on the ambiguous regulatory position of cryptocurrencies, which even Ripple and the U.S. securities regulator have been litigating in court for almost two years.

That said, the governor of the South Korea Financial Supervisory Service (FSS), Lee Bok-Hyun, has recently indicated that virtual assets could form part of the country’s securities and capital markets law.

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Shraddha Sharma
Shraddha is an India-based journalist who worked in business and financial news before diving into the crypto space. As an investment enthusiast, she has also has a keen interest in understanding crypto from a personal finance standpoint.
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