Terraform Labs Says LUNA Allegations are ‘Highly Politicized’

Do Kwon and Terraform Labs didn’t break the law as LUNA has never been a security, a spokesman reportedly said


Blockworks Exclusive Art by Axel Rangel


key takeaways

  • Terraform Labs declined to provide Do Kwon’s location due to physical security risks, it says
  • Prosecutors in Seoul are being unfair, the spokesman said

South Korean prosecutors have been on the lookout for Terraform Labs (TFL) founder Do Kwon, since the collapse of Terra’s stablecoins, over his alleged role in breaching capital-markets laws. 

TFL is now making its stance clear that it believes the LUNA token was never a security, implying that the cryptocurrency shouldn’t be considered illegal under the charges prosecutors are taking into account.

LUNA is the native token of the Terra blockchain and was previously integral to the issuance of Terra stablecoins, notably Terra USD (UST), though a process of seigniorage.

A spokesman for the firm told the Wall Street Journal on Wednesday that the case has become “highly politicized” and that South Korean prosecutors are displaying “unfairness and a failure to uphold basic rights.” 

A court granted prosecutors arrest warrants for Do Kwon and other key TFL insiders earlier this month, but detainment would be difficult as they were all believed to be living in Singapore. However, Singapore police said Do Kwon was no longer living there. 

Interpol, an international law enforcement organization, has now issued a Red Notice — or wanted persons notice — for the Terra founder.

Despite numerous efforts by various agencies to detain him, Do Kwon claims he isn’t on the run. He has said in tweets that he goes on walks and visits malls, and claimed he received no notice from the Interpol. “I’m making zero effort to hide,” he said.

But the Terra spokesman declined to furnish details on Do Kwon’s whereabouts, saying the matter is private due to physical security concerns for him and his family, according to The Journal. He also claimed unidentified efforts to break in at the crypto entrepreneur’s residences in South Korea and Singapore.

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Terraform’s claim that LUNA isn’t a security cannot easily be disputed, since the regulatory status of cryptocurrencies and stablecoins is still undefined at this point. The US Securities and Exchange Commission had reportedly been weighing whether the firm broke the law for securities and investment products, but the outcome of that investigation isn’t known yet. 

Terraform now suggests South Korean prosecutors have widened the scope of what constitutes a security to acknowledge complaints made in regard to Terra’s collapse.  

The Seoul prosecutors’ office and Terraform Labs did not return Blockworks’ request for comment by press time.

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