Prosecutors Launch Investigation into Luna and Terra's Securities Status... Will the Capital Markets Act Apply?

Financial Authorities and Experts Summoned for Testimony Investigation

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Byung-don] The prosecution investigating the Luna and TerraUSD (UST) crash incident is reportedly starting an investigation into the securities nature of Luna.

According to the prosecution on the 13th, the Seoul Southern District Prosecutors' Office Luna-Terra investigation team is assessing the securities characteristics of Luna by referring to overseas cases. The prosecution is said to have summoned and questioned financial authorities including the Financial Supervisory Service as well as virtual asset experts as witnesses.

In particular, the prosecution is reviewing whether the Capital Markets Act violations can be applied to Luna, UST, and the entire Terra ecosystem operating with these cryptocurrencies. If it is determined that Luna and Terra have securities characteristics, the prosecution can indict for unfair trading such as market manipulation under the Capital Markets Act.

Since the industry argues that virtual assets like coins are commodities rather than securities, attention is focused on the conclusion the prosecution will present.

Meanwhile, the securities nature of Luna and Terra is also under investigation by the U.S. Securities and Exchange Commission (SEC), focusing on the DeFi platform called "Mirror Protocol."

Mirror Protocol is a platform where users can trade digital synthetic assets that track the stock prices of U.S. companies such as Apple and Tesla by collateralizing UST. The SEC views this as an unregistered securities activity and has been investigating Terraform Labs CEO Kwon Do-hyung since last year.

Korean prosecutors have been receiving complaints and accusations from investors since around May, when Luna's price crashed, and are investigating CEO Kwon and co-founder Shin Hyun-sung, co-chairman of the board at TMON. The investigation involves the Seoul Southern District Prosecutors' Office Joint Investigation Team on Financial Securities Crimes and some prosecutors from the Financial Investigation Division 2.

This content was produced with the assistance of AI translation services.