South Korean Prosecutors Launch New Investigation Into Terraform Labs: Report

While the Terra/UST $60 billion fiasco appears to be gradually dying down, South Korean prosecutors have revealed plans to launch a fresh investigation into the firm and its executives.

According to a recent report by the Korean Herald, the Financial and Securities Crime Joint Investigation Team of the Seoul Southern District Prosecutors Office has met with several crypto experts and financial regulators to review Terra tokens.

Terra Tokens Could Be Securities 

Per the report, Korean prosecutors aim to determine whether to categorize Terra’s digital assets under securities, including its native token, LUNA. For the longest time, financial regulators have been working to determine which crypto assets are categorized as securities and non-securities. 

While several experts argue that cryptocurrencies are securities since they can be issued like stocks, others believe they should be classified as a commodity due to their decentralized characteristics.

If Terra tokens are determined to be securities in the investigation, TerraForm Labs, its founder Do Kwon, and other executives will be charged with violating the Capital Market Act.

The firm and its executives are facing fraud and tax evasion charges leveled against them following the UST debacle earlier in May, resulting in the loss of over $60 billion in investors’ funds.

The latest investigation comes as part of efforts by South Korean prosecutors to widen their probe into Terraform Labs and its co-founders regarding the cataclysmic collapse of LUNA and UST.

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Korean authorities have scrutinized several individuals and entities related to the Terra case. Earlier in July, the prosecutors raided the house of Terraform Labs’ co-founder, Daniel Shin, as part of ongoing investigations. 

According to people familiar with the matter, the prosecutors’ new decision would also help policymakers develop the country’s legal framework for crypto regulation.

U.S. SEC Expands Probe into Terra

As per the report, the United States Securities and Exchange Commission (SEC) is also expanding the scope of its investigations into Terraform Labs. 

The firm’s DeFi platform, Mirror Protocol, is currently under the SEC radar for selling mirrored assets Netflix and Tesla stocks in UST.