South Korean prosecutors investigating the collapse of Terra-Luna, a cryptocurrency project that experienced a US$40 billion failure last year, are seeking to present a recent U.S. ruling on Ripple cryptocurrency to a Seoul court. The Seoul Southern District Prosecutor’s Office aims to use the ruling on Ripple’s XRP cryptocurrency to establish that Terraform Labs’ Luna cryptocurrency should be classified as financial securities. The prosecutors have accused Terraform Labs’ co-founders, Kwon Do-hyeong and Shin Hyun-seung, of several charges, including fraud and unregistered offerings of financial securities.
The Seoul Southern District Prosecutor’s Office recently received a translated version of the ruling on the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Ripple Labs, which focused on the sale of XRP cryptocurrency. The prosecutors plan to submit this ruling to the local court in Seoul to support their claim that Luna cryptocurrency should be considered financial securities. The U.S. Court for the Southern District of New York determined on July 13 that Ripple Labs’ programmatic sales of XRP did not meet the criteria for the offer and sale of financial securities. However, the court concluded that Ripple’s institutional sales of XRP constituted an unregistered offer and sale of securities.
Director Dan Sung-han of the Seoul Southern District’s joint financial crimes team stated that the latter part of the U.S. ruling can be used to demonstrate that Terra’s offerings of Luna cryptocurrency violated securities regulations. This development was reported by local news outlet Maeil Business News.
Meanwhile, one of Terra’s co-founders, Kwon, is currently detained in Montenegro for attempting to travel with forged passports. In addition, a Seoul court held the first preliminary hearing for Shin and seven former Terra employees on July 10. Kwon is also wanted in the U.S. on similar charges of fraud and securities law violations related to the collapse of Terra-Luna. He has denied the charges against him, claiming they are baseless and politically motivated.
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The inclusion of the U.S. ruling on Ripple’s XRP cryptocurrency in the Terra-Luna case underscores the global nature of cryptocurrency regulatory investigations. In recent years, authorities around the world have been grappling with how to classify and regulate cryptocurrencies, given their unique characteristics and transformative potential in financial markets. This case in South Korea highlights the interconnectedness of global cryptocurrency investigations and the potential impact of legal rulings in one jurisdiction on cases occurring in another.
The submission of the U.S. ruling to the Seoul court may significantly affect the outcome of the Terra-Luna case in South Korea. If the court determines that Luna cryptocurrency should be classified as financial securities, Terraform Labs and its co-founders could face severe penalties and legal repercussions. This decision could set a precedent for future cryptocurrency-related cases in South Korea and potentially influence regulatory approaches in other jurisdictions as well.
The investigation and legal proceedings surrounding the collapse of Terra-Luna serve as a cautionary tale for the cryptocurrency industry. It highlights the importance of regulatory compliance, transparency, and accountability within the sector. As cryptocurrencies continue to gain mainstream attention and adoption, it becomes crucial for companies and individuals operating in this space to adhere to legal and regulatory requirements to protect investors and maintain trust in the industry.
In response to the growing complexity and global nature of cryptocurrency investigations, the Seoul prosecutors have established a dedicated crypto investigations team to focus on cases involving cryptocurrencies. This specialized team demonstrates the recognition of the unique challenges posed by cryptocurrencies and the need for expertise in handling these cases effectively.
The outcome of the Terra-Luna case in South Korea will be closely watched by industry participants, regulators, and legal experts around the world. It has the potential to shape the future of cryptocurrency regulation and contribute to the establishment of legal precedents in this evolving area of finance. As cryptocurrencies continue to evolve and gain wider adoption, governments and authorities worldwide will face increasing pressure to develop comprehensive and effective regulatory frameworks for this industry. The Terra-Luna case represents a significant milestone in this ongoing process and highlights the importance of international cooperation in addressing the challenges posed by cryptocurrencies.
