Terraform Labs claims the case against Do Kwon is 'highly politicized,' according to the WSJ

By: Dickson Arinze

September 29, 2022 7:51 AM

After the associated cryptocurrencies collapsed, a representative for the company behind Terra said it believes prosecutors caved to public pressure and broadened the definition of a security.

According to Terraform Labs, the company behind the Terra (LUNA) blockchain, the case brought against Terraform Labs' co-founder Do Kwon in South Korea has become politically motivated after prosecutors allegedly broadened the concept of a security in reaction to the public tension.

On September 28th, a spokesman for Terraform Labs told The Wall Street Journal, "We believe that this case has become highly politicized, and that the actions of the Korean prosecutors demonstrate inequality and injustice and a failure to abide by basic rights assured under Korean law."

In response to a warrant for Kwon's arrest issued by South Korean prosecutors on September 14 for alleged violations of the country's capital markets laws, Terraform Labs has laid out a defense claiming that Terra (now known as Terra Luna Classic (LUNC)) is not legally a security and thus is not subject to such regulations.

Due to public pressure following the demise of Terra and its associated algorithmic stablecoin TerraUSD (UST), now known as TerraClassicUSD, the company's spokesman claimed that prosecutors had widened the definition of a security (USTC).

"Despite recent shifts in interpretation by Korean financial officials, we and the vast majority of the industry continue to maintain that Luna Classic is not and has never been a security."

Because of the hazy legal standing of cryptocurrencies and the companies that create and issue them, Terraform Labs has a point of argument.

There is currently no legal definition of non-standardized securities issued through a blockchain within the country's capital market and electronic securities' systems.

The Financial Services Commission (FSC), the country's financial watchdog, is working to establish regulations for security tokens by the end of 2022.

A government report from May that was leaked online revealed additional details about South Korea's plans to implement a crypto framework by the year 2024.

Although Kwon's whereabouts are unknown and Terraform Labs has refused to comment on the matter due to physical security concerns, he claims he is not hiding and that Interpol has notified authorities around the world.