South Korean prosecutors freeze $93M of Terra Luna profits

The Seoul Southern District Court in South Korea ruled on December 20, 2022 that prosecutors can freeze the assets of seven parties involved with the Terra Luna ecosystem.

According to a local Korean publication, prosecutors will freeze nearly $93 million in profits from three Terra Luna investors and four TerraForm Labs employees who sold Luna at a handsome profit before the cryptocurrency was publicly released. Prosecutors also suspect that the Terra Luna cohort is aggressively pursuing the issuance of Luna, even though the cryptocurrency is not a legal form of payment in Korea.

Terra Luna prosecutors continue to freeze assets

Kim Amugae, CEO of Kernel Labs, used most of Luna’s profits to buy several properties in Seoul, the capital of South Korea, while Mr. Choi, the company’s former CEO, made $31 million from the sale of Terra Luna. Kernel Labs originally provided key technology to Terraform Labs.

This latest seizure by Korean prosecutors comes nearly a month after prosecutors froze assets worth $108 million of Terraform co-founder Daniel Shin. Prosecutors suspect that Shin, like Seven, profited privately from Luna’s staking before Terraform Labs launched the coin to the public. CEOs Do Kwon and Shin began marketing LUNA to the public in 2018.

CEO Kwon has been the subject of a global manhunt since Korean prosecutors asked Interpol to issue a red notice for his provisional arrest. If found and arrested, the Terra Luna boss is likely to be extradited to South Korea. There, he faces charges of financial fraud and violating Korea’s capital market law.

According to city-state officials, Kwon fled to Singapore in April 2022, and was rumored to be living in Dubai and later in Europe.

Earlier this month, a local Korean publication claimed prosecutors appealed to Serbia’s government for cooperation after tracking down Kwan in the landlocked European state. While Serbia and South Korea do not have an extradition agreement, both countries have previously cooperated under the European Convention on Extradition.

The search for Kwon began after Terraform’s stablecoin TerraUSD (UST) collapsed in May 2022. A stablecoin is a type of cryptocurrency that maintains a value of $1 through an asset store or algorithm. UST maintains its peg to the dollar through an algorithmic relationship with sister coin LUNA.

Kernel Labs reportedly developed the technology to retain the UST’s peg after filing a patent with the Korean Intellectual Property Office in August 2018.

In May, the value of UST dropped to around 90 cents after a series of large transactions on Curve, a decentralized finance protocol that allows users to swap stable coins. An entity or group of entities pulled UST liquidity off the curve, causing its price to drop sharply. People started pulling their UST from crypto platforms including Terra Luna Bank, Anker. The algorithm began creating more and more Luna to help restore the UST’s dollar peg. As more LUNA flooded the market, its value plummeted, leaving holders with a fraction of their initial investment.

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BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.

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