In recent times, news of the Terra ecosystem’s resounding crash seems to have faded out of the limelight. However, South Korean prosecutors are set to reopen the case as they look into whether Terra’s native assets are securities.
South Korea Prosecutors Review Terra Assets
On Tuesday, local publication Korean Herald shared a release highlighting the plans of Seoul’s Southern District Prosecutors Office. The report noted that the Office’s Financial and Securities Crime Joint Investigation Team has been in touch with crypto experts and financial authorities of late. South Korea’s prosecutors aim to determine whether or not Terra’s digital assets including Luna should be classified as securities.
The term security describes virtually any tradable financial asset, these include stocks and debt securities among others. Whether or not virtual assets qualify as securities is a long-running debate within the crypto sector. Financial regulators have repeatedly raised the question of whether cryptocurrencies are securities. Ripple, for one, has been in the middle of similar legal troubles for years.
Some parties believe that digital currencies are securities. The basis for this argument is that cryptocurrencies can be issued like stocks. Meanwhile, others cite the decentralized nature of digital assets as a reason to classify them as commodities.
Existing Legal Struggles
If Korea’s prosecutors deem Terra assets securities after their investigation, parent company TerraForm Labs and founder Do Kwon will face new charges. The authorities will charge TFL alongside its executives with violating the Capital Market Act.
Whatever the officials decide on will also be instrumental as legislators outline a regulatory structure for South Korea’s crypto sector. Notably, TFL is already dealing with legal troubles from the Terra network’s resounding collapse in May. This was an event that saw investors lose $60B worth of assets.
Following the collapse, the company was slammed with allegations of fraud and tax evasion. Afterward, in July prosecutors ransacked the home of TFL co-founder Daniel Shin. Other leading crypto companies with ties to Terra were also subjected to a probe for the broadening investigation.
Interestingly, Terra CEO Do Kwon’s exact location is unknown at the moment. Prosecutors have placed “a notification upon arrival” on the Terra leader. Through this, the relevant authorities will be aware once Do Kwon enters Korea.
The report also pointed out that news of the prosecutors’ investigation comes as the US Securities and Exchange Commission plunges deeper into its TFL probe. Presently, the SEC is looking into TFL’s DeFi platform, the Mirror protocol.
TFL did not register Mirror Protocol in the US. Hence, the SEC is probing whether the company violated consumer protection laws in marketing the troubled coins in the country.