The court rejected the prosecution’s requests for property confiscation and arrest of Shin based on securities law violations, and noted that it is difficult to view LUNA as a financial investment product regulated by the Capital Markets Act.
The recent ruling by a South Korean district court has dismissed charges of security violations against Hyun-seong Shin, the former CEO and co-founder of Terraform Labs, in a case involving the native token of the LUNA ecosystem, known as LUNA. The court unequivocally stated that LUNA is not a security, under Korea’s Capital Markets Act.
The court in Seoul rejected the prosecution’s appeal for confiscating Shin’s properties and his arrest based on securities law violations. The prosecution had argued that Luna’s fraudulent transactions breached the Capital Market Act and involved crimes involving property, making property confiscation a possibility.
However, the court observed that it was difficult to view LUNA as a financial investment product regulated by the Capital Markets Act, and therefore rejected the prosecution’s requests for confiscation of the accused’s properties.
Notably, this ruling stands out as it categorically states that LUNA is not a security, whereas previous court rulings had used cautious language, suggesting that there was room for dispute in terms of the law and questioning whether the Capital Market Act could be applied. The lawyer representing the former CEO highlighted that the court’s ruling indicated that LUNA could not easily be considered an investment product.
The Terra-LUNA saga is now framed as a case of fraud and breach of trust, rather than a violation of the Capital Markets Act with this latest ruling. However, the prosecution is still focusing on the securities aspect of the native token and has appealed to the Supreme Court against the lower district court’s verdict.
It is worth noting that this judgment by the South Korean court contrasts with the stance of the United States Securities and Exchange Commission (SEC), which has charged Terraform Labs and its founder, Do Kwon, with violations of securities law. Kwon’s lawyers have denied the SEC’s allegations of securities fraud, further adding complexity to the legal proceedings surrounding LUNA.