phone showing terra luna

South Korea: Prosecutors raid digital assets exchanges in Terra investigation

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South Korea is taking renewed steps to dig into the involvement of local exchanges in the crash of Terra blockchain tokens—the algorithmic stablecoin Terra USD (UST) and its sister token, LUNA. 

Yonhap News Agency (YNA) reports that investigators from the Seoul Southern District Prosecutors Office searched the offices of several digital assets exchanges on the evening of July 20 to seize trading records and other materials related to the Terra collapse. The exercise, executed by the members of the Office’s Joint Financial Securities Crime Investigation Team, affected seven local exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax. 

The team also visited investment firm Dunamu and Partners, who reportedly bought $20 million worth of LUNA tokens in the early days of the Terra blockchain, as well as eight other locations, including the homes and offices of persons allegedly involved in the case. The prosecutors were reportedly securing the transaction details of Terra as it builds its case against Do Kwon and Shin Hyun-seong, the co-founders of Terraform Labs (TFL), which are the core developers of the project.

Several lawsuits and allegations have been brought against the duo, including fraud, suspicion of similar reception, and tax evasion. The team plans to analyze the seized material and then question the witnesses before it determines the size of the damage. 

It also intends to analyze if the crash was caused intentionally by Kwon and other irregularities. According to YNA, the team has also secured Do Kwon’s tax records from the tax authorities as part of its probe. The Prosecutor’s Office had also previously subpoenaed and placed a departure ban on staff TFL.

South Korea looking to tighten regulations next

While the prosecutors work on the case, the South Korean government has been trying to introduce comprehensive regulations for the industry. The regulations will target the entire industry, from exchanges to investment firms and digital assets, their issuers, and blockchain networks. 

Terra’s ecosystem crash has had far-reaching effects on the digital assets market. Several digital assets funds and companies have gone bust due to Terra going down with billions of their investments. 

The digital assets industry’s reputation damage from the Terra crash has not been limited to only South Korea. Many other regulators globally, such as the European Union and the United States, have highlighted the crash as the reason for regulations to be made to curtail the excesses of the digital assets market. 

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