Security violations charges against Terraform Labs co-founder Daniel Shin have been dismissed by a South Korean district court, which further deemed that the firm’s native token luna was not a security.
This latest ruling is markedly decisive compared to previous court discussions. “It is difficult to see Luna Coin as a financial investment product regulated by the Capital Markets Act,” a translation of the court ruling reads. Previous court hearings regarding luna have shown authorities on the fence, stating that there was room for debate in the law, and “it is questionable whether the Capital Market Act can be applied.”
The decision that Shin didn’t violate securities law came as a response to an appeal filed by prosecutors to not dismiss an arrest warrant and confiscation of property for Shin. Co-founder Do Kwon is currently detained in Montenegro on charges of document forgery. South Korean authorities are looking to extradite Kwon — but the US is also battling for its own extradition.
Shin’s lawyer said, “The court rejected all of the prosecution’s 10 or so requests for arrest warrants against former CEO Shin and others involved in this case, consistently ruling that there is room for dispute on whether or not the Capital Markets Act was established.
“It can be seen that the court judges that it is difficult to view luna as a financial investment product.”
The implications of the South Korean court’s decision mean that, moving forward, prosecutors must argue that the pair are guilty of fraud and breach of trust rather than violating the country’s Capital Markets Act.
However, the US Securities and Exchange Commission (SEC) has charged Terraform Labs and Kwon for violating national securities law. As noted by attorney Koo Tae-eon, however, “This is not the judgement of the US judiciary, but the SEC’s argument,” and therefore is still subject to dispute in court.