Terra Co-Founder Scores Major Win; South Korean Court Rules Luna Not A Security

Terraform Labs co-founder and former CEO Shin Hyun-Seong, more popularly known in the crypto space as Daniel Shin, has scored a major win as a South Korean district court dismissed prosecutors' security violation charges against the executive and noted Terra's native token, Luna, is not a security.

The South Korean court of second instance on Feb. 16 denied the prosecutors' appeal request to confiscate Shin's assets and ruled the prosecution cannot seize the assets and turn them over to the country's public treasury, a local news outlet reported over the weekend.

After the prosecution appealed the court's previous decision, a southern district court in Seoul rejected the request to seize the properties of the Terraform Labs co-founder and his arrest based on securities law violations.

The prosecution argued that the fraudulent Luna transactions violated the country's Capital Market Act, in addition to crimes involving property, claiming confiscation of property was a possibility, the local news outlet said.

The court, in its decision, noted it was difficult to see the accused's properties in question were "acquired by a crime or an asset derived from it."

The South Korean district court's ruling categorically stated that Terraform Labs' native token Luna was not a security, although other courts previously used safer language when classifying the crypto asset.

"It is difficult to see Luna Coin as a financial investment product regulated by the Capital Markets Act," the court observed, according to a Google translation.

Shin's lawyer said the court dismissed the prosecution's request to arrest his client and other individuals linked to the case, adding that it ruled Luna could not be considered an investment product.

"The Arrest 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," Shin's lawyer said, noting that "It can be seen that the court judges that it is difficult to view Luna as a financial investment product."

The latest South Korean district court ruling about LUNA is in contrast with the charges filed by the U.S. Securities and Exchange Commission (SEC) in February, which accused Kwon and his company Terraform Labs' of securities law violation.

"Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities," the U.S. financial watchdog said in February.