Luna Is Not a Security Claims South Korean Court: Report
In US courts, Do Kwon denied that luna is a security by current regulatory standards
WindAwake/Shutterstock modified by Blockworks
Luna’s status as a potential crypto asset security is not only being questioned by Do Kwon’s lawyers, but also allegedly by South Korean courts.
According to South Korea’s Ilyo Shinmun, a court judgment has ruled that luna is not a security.
“Based on the data submitted by the prosecution, it is difficult to say that Luna falls under the financial investment product regulated by the Capital Markets Act,” the news outlet reported.
South Korea’s Capital Market Act regulates securities and establishes capital market infrastructures. It is overseen by the Financial Services Commission, which operates in a similar fashion to the SEC.
The report comes after Do Kwon’s legal team submitted a motion to dismiss the SEC’s complaint.
The SEC charged Do Kwon and Terraform Labs with securities fraud in relation to the algorithmic stablecoin UST in February. Through the Anchor Protocol, UST operated as a “yield-bearing stablecoin.” The SEC alleges that the stablecoin was therefore a security because it created a reasonable expectation of profit derived from the efforts of others.
As part of Kwon’s legal pushback, his team has argued that there is no understandable basis for the definition of crypto security because “the executive branch overall has conflicting ideas about which agency should regulate which assets.” Meaning that Congress and even the SEC itself have not established the definition of crypto securities or regulation around them.
“The cryptocurrency industry is a large and innovative part of the global and American economies, and there is no evidence that the 1930s statutory structure contemplated it,” Kwon’s team argued.
They also argued that UST does not apply under the Howey test, which determines whether an asset could be considered a security under current laws.
“The focus of the Howey analysis is not only on the form and terms of the instrument itself (in this case, the digital asset) but also on the circumstances surrounding the digital asset and the manner in which it is offered, sold, or resold (which includes secondary market sales),” the SEC said on its website.
“The fact that an asset is, at some point, part of a transaction that constitutes an investment contract does not make the asset a security,” Kwon’s team argued in the filing.
Kwon was arrested in Montenegro back in March for “falsified documents.” He’s wanted by South Korea on fraud allegations, and both the US and South Korea want to extradite him.
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