South Korea’s Supreme Court has ruled that the collapsed stablecoin TerraClassicUSD (USTC) and its sister token Terra (LUNA) do not qualify as financial investment products.
According to a local news outlet Etoday, the court gave the ruling as it dismissed a prosecution request to seize assets from Terraform Labs co-founder Shin Hyun-seong.
Notably, the apex court upheld previous lower court rulings that LUNA does not fall under the Capital Markets Act as a regulated financial product. The court emphasized that “related law and records show the lower court’s decision is valid,” reinforcing the stance that LUNA is not subject to securities laws.
Prosecutors had argued that LUNA qualified as a security and sought to seize Shin’s assets, alleging he had gained illicit profits. However, the South Korean courts consistently ruled that LUNA does not meet the legal criteria for a security, making asset seizure under securities law unfeasible.
Despite this ruling, Shin and other Terraform executives still face fraud charges, with prosecutors accusing them of deceiving investors and manipulating the Terra blockchain for financial gain. A Seoul Southern District Prosecutors’ Office official stated that the case remains under trial, and the final verdict on criminal charges will determine further legal consequences.
Meanwhile, Terraform’s co-founder Do Kwon was extradited from Montenegro and appeared in a Manhattan court in January to face federal fraud charges. A U.S. grand jury indicted him for allegedly inflating Terraform’s crypto prices and laundering funds. The collapse of Terra in May 2022 wiped out over 40 billion, causing massive financial losses for investors worldwide.
In a separate case, South Korea’s Financial Services Commission (FSC) is preparing to sanction Upbit, the country’s largest crypto exchange, for violating customer identity verification rules. An investigation revealed over 700,000 anti-money laundering breaches, with potential penalties including billions in fines, a six-month suspension, or restrictions on new user registrations. FSC Governor Kim Byoung-hwan stated that a final decision would be made swiftly.
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