Terraform Labs, the company behind the development of the Terra blockchain, said South Korea’s case against its co-founder Do Kwon has become politicized, alleging that prosecutors broadened the definition of a security in response to public pressure.
“We believe that this case has become highly politicized and that the actions of the Korean prosecutors show that they are unfair and that they do not respect the basic rights guaranteed by Korean law,” said a spokesperson for Terraform Labs. to the Wall Street Journal on September 28.
South Korean prosecutors issued an arrest warrant for Kwon on September 14 for violations of the country’s capital markets laws, but Terraform Labs filed a defense arguing that Terra, now known by its new token, Luna Classic (LUNC), is not legally a security, meaning it is not covered by capital markets laws.
The spokesman claimed that prosecutors expanded the definition of a security due to intense public pressure over the collapse of Terra and its connected algorithmic stablecoin TerraUSD (UST), now known as TerraUSD Classic (USTC):
“We believe, as does most of the industry, that Luna Classic is not, and never has been, a security, despite changes in interpretation that Korean financial officials may have adopted recently.”
The “Terraform Labs” argument is due to the lack of clarity of the regulatory situation of cryptocurrencies and the companies that create and issue them.
Currently, The country’s electronic securities and capital market systems do not include a legal definition of non-standardized securities issued through a blockchain.
The country is moving to regulate the space, and its financial regulator, the Financial Services Commission (FSC), is preparing guidelines on security tokens by the end of 2022.
A leaked government report in May revealed South Korea’s plans to roll out a cryptocurrency framework by 2024..
Kwon’s whereabouts remain unknown and Terraform Labs would not comment on his location citing physical security risks.but Kwon says he’s not making an effort to hide even after Interpol sent a tip to world authorities.
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