Former Terraform Labs CEO and co-founder Hyun-seong Shin has been cleared of security violation charges by a district court in South Korea. The court ruled that LUNA, the native token of the Terra-LUNA ecosystem, is not a security according to Korea’s Capital Markets Act.
The southern district court in Seoul dismissed the prosecution’s appeal for Shin’s property confiscation and arrest based on securities law violations. The prosecution had accused Shin of fraudulent transactions involving LUNA that breached the Capital Market Act and involved property crimes such as fraud, making property confiscation a possibility.
The court’s decision to dismiss stated that “it is difficult to view LUNA as a financial investment product regulated by the Capital Markets Act.” The defence rejected the prosecution’s argument that LUNA falls under the category of investment contract securities.
According to Shin’s attorney, the Arrest Court denied all of the prosecution’s approximately 10 requests for arrest warrants against Shin and other parties involved in the case. The court ruled that there is room for debate regarding whether the Capital Markets Act applies, indicating that it is difficult to classify LUNA as a financial investment product.
The court also denied the prosecution’s request to seize Shin’s properties, stating that there was insufficient evidence to prove that the assets in question were obtained through criminal means or from illegal activity.
Shin was accused of committing property-related crimes (fraud) and violating the Capital Market Act by the prosecution, which argued that such actions infringed upon independent legal interests and warranted property confiscation.
However, the second trial court found it challenging to determine whether Shin’s fraudulent transactions fell under the category of financial investment products regulated by the Capital Markets Act based on the evidence presented by the prosecution.
The court’s ruling provides clarity on the status of LUNA as a non-security under Korea’s Capital Markets Act and could have implications for other cryptocurrencies and tokens in South Korea.
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