In an article published yesterday, this author gave a look into the allegations Terra's Founder, Do Kwon 'cashed-out' $67 Million in Bitcoin using the Luna Foundation Guard from the failing Terra/Luna/UST debacle. Said funds presently frozen by the South Korean Authorities who have caused an Interpol 'red notice' to issue for Kwon's arrest. [See, Nagoda, K. $67 Million in Bitcoin tied to Do Kwon frozen by South Korean Authorities. (Accessed September 29, 2022)
After the publishing of the aforementioned article the following information came to light.
"Terraform Labs, the digital-asset firm of hunted entrepreneur Do Kwon, rejected South Korean charges over a $60 billion cryptocurrency collapse and said the case against him had become 'highly politicized'. A spokesperson for the firm said in a statement that prosecutors had demonstrated 'unfairness and a failure to uphold basic rights guaranteed under Korean law,' adding that there’s 'no reasonable basis' for their accusation of breaches of capital-markets law" [Ossinger, J. and Cha, S. Do Kwon’s Terra Says Crypto Case Unfair and ‘Highly Politicized’. (Accessed September 29, 2022).
"Prosecutors have charged Kwon, a South Korean citizen, with violating the country’s capital markets laws, after prosecutors treated Terraform’s Luna cryptocurrency, now Luna Classic, as a security. The company denied that assertion. The company expressed its objection to the September 14 arrest warrant issued by South Korean prosecutors against Kwon and his 5 associates" [Coincu. Terraform Labs Disgruntled With Unfair Treatment By Korea. (Accessed September 29, 2022)].
Terraform Labs laid out a defense arguing Terra, now known with its new token, Luna Classic (LUNC), isn’t legally a security, meaning it isn’t covered by capital markets laws. The spokesman alleged prosecutors of expanding the definition of a security due to intense public pressure from the collapse of Terra and its connected algorithmic stablecoin TerraUSD (UST), now known as TerraUSD Classic (USTC): 'We believe, as do most in industry, that Luna Classic is not, and has never been, a security, despite any changes in interpretation that Korean financial officials may have recently adopted.”
[Goghlan, J. Terraform Labs claims case against Do Kwon is ‘highly politicized:’ WSJ. (Accessed September 29, 2022)].
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.
[Sharma, S. Terra Spokesman Argues ‘Luna Classic has Never Been a Security’ Amid Legal Trouble. (Accessed September 29, 2022).
"Just how to classify digital tokens remains a highly vexing issue for regulators the world over" [Ossinger and Cha, supra].
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. 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'.
[Sharma, supra]
"The TerraUSD stablecoin was meant to be pegged to the US dollar. The system relied on a complex mix of algorithms and trader incentives involving its sister token Luna. But it unraveled when confidence in Kwon’s project evaporated" [Ossinger and Cha, supra].