South Korea’s Supreme Court has sided with lower courts in deciding that TerraUSD and LUNA do not meet the criteria for financial investment products.
Korea‘s Supreme Court has ruled that the collapsed stablecoin TerraUSD (USTC) and its sister token Terra (LUNA) are not financial investment products, rejecting a prosecution appeal and upholding earlier decisions, Korean newspaper Etoday reports.
On Jan. 23, the court rejected prosecutors’ request to seize assets from Terraform Labs co-founder Shin Hyun-seong. The court agreed with lower courts that had already ruled LUNA does not qualify as a regulated financial product under Korea’s Capital Markets Act, stating that “related law and records show the lower court’s decision is valid.”
Prosecutors argued that LUNA was some sort of security and tried to confiscate Shin’s assets, claiming he made illegal profits. Yet, courts have repeatedly ruled that LUNA does not meet the legal definition of a security or financial investment product.
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Capital Markets Act does not apply
Lawyer Kim Jung-chul from Law Firm Woori said the ruling does not just dismiss LUNA’s security status, but also “confirms that the Capital Markets Act does not apply, meaning asset seizure based on that law is not possible.”
Despite the ruling, Shin and other Terraform executives still face fraud charges. Prosecutors say they misled investors and manipulated the market to profit from the Terra blockchain.
Do Kwon, the key figure behind Terra, was extradited from Montenegro and appeared in a Manhattan court in January on federal fraud charges. A U.S. grand jury indicted Kwon for inflating Terraform’s crypto prices and laundering funds. The collapse of Terra in May 2022 wiped out over $40 billion, causing major losses for investors worldwide.
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