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

article-image

Blockworks Exclusive Art by Axel Rangel

share
  • 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.

Loading Tweet..

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.


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.jpg

Research

Figure, founded by former SoFi CEO Mike Cagney, has emerged as a leader in onchain RWAs, with ~$17.5B publicly tokenized. The platform’s ecosystem volume is growing ~40% YoY as it expands beyond HELOCs into student loans, DSCR loans, unsecured loans, bankruptcy claims, and more. Operationally, Figure cuts average loan production cost by ~93% and compresses median funding time from ~42 days to ~10, creating a durable speed-and-cost advantage.

article-image

If the president breaks the Fed, he’ll own the budget problems

article-image

Combining Franklin Templeton’s tokenization expertise with Binance’s trading infrastructure could speed crypto adoption, companies say

article-image

The firm’s upcoming filing comes as competition heats up over the USDH stablecoin

article-image

Robinhood and Coinbase are vying for user attention with new social features that could rival Twitter

article-image

Atkins backs predictable digital asset framework through Project Crypto, marking a departure from prior enforcement tactics

by Blockworks /
article-image

Following a roundtable, the startup emerges as frontrunner, despite entries from Paxos, Ethena, and others