If the Terra tokens LUNA, LUNC, and UST (now USTC) are determined to be securities, TerraForm Labs, its founder Do Kwon, and other affiliates will also be prosecuted with breaking the Capital Market Act.
Authorities are looking at whether Terra is a security.
The Korea Herald reported on September 13 that the Financial and Securities Crime Joint Investigation Team of the Seoul Southern District Prosecutors Office met with experts from cryptocurrency exchanges and financial regulators, such as the Financial Supervisory Service, to ascertain whether Terra tokens are securities.
Additionally, the lawsuit will claim that TerraForm Labs, Do Kwon, and other affiliates broke the Capital Markets Act. Currently, suspicions of fraud and tax evasion are being investigated against Terra and its leadership.
Regardless of the conclusion reached by the financial authorities, the prosecutors looking into the failure of LUNA (now LUNC) and UST (now USTC) may charge the defendants with violations of the Capital Markets Act. Additionally, the decision of the prosecutors would benefit lawmakers in the upcoming crypto regulation.
The division of cryptocurrencies into securities and non-securities is a goal of financial regulators. However, given that they can be issued like stocks, some experts hold that cryptocurrencies are securities, while others view them as commodities because of their decentralised nature.
The LUNA creator Terraform Labs is also under investigation by the U.S. Securities and Exchange Commission (SEC). Mirror Protocol, Terra's decentralised financial network, is being investigated for offering mirrored US stock assets in UST.
With community support, LUNA and LUNC are surging.
The price of LUNC and LUNA tokens increased by almost 200% last week while South Korean authorities looked into charges of fraud and other wrongdoing against Terra. Each coin had daily trading volume of more than $3.5 billion.
The price of Terra Classic (LUNC) reached a peak of $0.00058. It is now down about 2% over the past 24 hours, trading at $0.00035. Support for the 1.2% tax burn and staking of LUNC tokens coincides with the rally.
The cost of Terra (LUNA) rose to a high of $7.66 in the meantime. The cost has significantly decreased and is at $4.43.
