Apr 25, 2023
Court Ruling: LUNA Not A Security Under Capital Markets Act
A South Korean district court has dismissed charges of security violations against former Terraform Labs CEO and co-founder Hyun-seong Shin. The court deemed LUNA (LUNA) (the native token of the LUNA ecosystem) as non-security under Korea’s Capital Markets Act.
The Seoul Southern District Court recently rejected the prosecution’s appeal for confiscating Shin’s properties and his arrest based on securities law violations. The prosecution had argued that Luna’s fraudulent transactions breached the Capital Market Act in addition to crimes involving property (fraud), making property confiscation a possibility, a local daily reported.
Google translated version of the court’s observation read:
“It is difficult to see Luna Coin as a financial investment product regulated by the Capital Markets Act.”
The court, while denying the prosecution’s request for confiscation of the accused’s properties, noted that it is difficult to view the property subject to the claim as “acquired by a crime or an asset derived from it.”
This ruling is significant because it states categorically that Luna is not a security. Other courts have previously used cautious language like “there is room for dispute in terms of the law” and “it is questionable whether the Capital Market Act can be applied.”
The lawyer representing the former CEO said that the court rejected the prosecution’s requests for an arrest warrant for his client and individuals associated with this case. He added that Luna could not easily be considered an investment product based on the court ruling.
The latest court ruling makes the Terra-LUNA saga a case of fraud and breach of trust rather than a violation of the Capital Markets Act. However, the prosecution is still focusing on the securities aspect of the native token and has also appealed to the Supreme Court against the verdict of the lower district court.
The judgment by the Korean district court is in contrast to the stance of the United States Securities and Exchange Commission, which has charged Terraform Labs and its founder, Do Kwon, with violation of securities law. However, Kwon’s lawyers have denied the SEC’s securities fraud allegations.
The ruling is a major victory for the web3 space, as it is the first court ruling in South Korea that acknowledges the legitimacy of NFTs, cryptocurrencies, and other digital assets. This ruling is likely to have a positive impact on the NFT and crypto markets, as well as the broader web3 ecosystem.
The ruling also opens up the possibility of NFT marketing and promotion by companies and individuals in South Korea. Companies and individuals can now advertise and promote their NFTs on various online platforms, including Twitter, without fear of legal repercussions. It also opens up the possibility of hiring a NFT marketing agency or web3 agency to help them in selling their NFTs.
The ruling is a major step forward for the web3 space, as it provides legal clarity on the status of NFTs, cryptocurrencies, and other digital assets in South Korea. This is likely to have a positive impact on the NFT and crypto markets, as well as the broader web3 ecosystem.
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