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

article-image

WindAwake/Shutterstock modified by Blockworks

share

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.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (2).png

Research

We’re bullish on the PUMP token. We believe Pump.fun's brand strength, existing integrations, product roadmap, and strategic levers justify PUMP's TGE valuation, and expect the token to re-rate meaningfully higher in the months ahead.

article-image

The non-profit’s “Project Open” seeks to let stocks trade directly on Solana

article-image

The acquisition is Pump.fun’s first, and comes just days before its planned ICO

article-image

As Trump’s tariff war reignites, everyone is assuming the dollar will continue its path lower. But the journey might be bumpy

article-image

A valuation model for “blockchain GDP”

article-image

The mini app combines vibe-coding with a hypercasual game feed and is coming to the new Coinbase Wallet

article-image

An improbable tale of the world’s 40th graphics-chip startup