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The company behind the Terra ecosystem, Terraform Labs, believes South Korean prosecutors have overextended their authority with the arrest warrant for CEO Do Kwon, the Wall Street Journal reported on 28 September.
The publication cited a spokesperson for Terraform Labs, who said that South Korean prosecutors acted unfairly when they issued Do Kwon’s arrest warrant, and noted that the case had “become highly politicized”. He also criticized the prosecutors for overextending their authority, which demonstrated “unfairness and a failure to uphold basic rights guaranteed under Korean law”.
South Korean authorities issued an arrest warrant for Do Kwon and five other individuals on 14 September, accusing them of violating the country’s Capital Markets Act. Terraform Labs’ spokesperson, however, argued on Wednesday that the ecosystem’s native token, Luna Classic (LUNC), wasn’t legally a security and did not fall under the capital markets laws. He also accused the prosecutors of expanding the definition of a security due to the public pressure that followed the collapse of its algorithmic stablecoin TerraUSD (UST). He said in a statement:
“We believe, as do most in industry, that Luna Classic is not, and has never been, a security, despite any changes in interpretation that Korean financial officials may have recently adopted.”
Terraform Labs’ argument was fueled by the lack of a clear regulatory status in South Korea for cryptocurrencies and the firms who create them. The country, however, will soon put the Financial Services Commission (FSC) in charge of the crypto space, and the financial regulator is already expected to issue guidelines for security tokens by the end of 2022.
While Do Kwon continues to claim he was not on the run — with him tweeting recently that he is “making zero effort to hide” — his location remains a mystery. Korean prosecutors originally thought that he was in Singapore, but local authorities have confirmed he was no longer located in the city-state. Earlier this week even Interpol got involved, with the international police organization reportedly issuing a worldwide “Red Notice” for Do Kwon.