South Korean Court Rules Luna Coin Not a Security, Rejecting Prosecution’s Claim

The Seoul Southern District Court in South Korea has dismissed the prosecution’s claim that Luna Coin is security. According to Korean media ilyo, cryptocurrencies were not considered securities in previous South Korean court trials, and thus were not regarded as financial investment products regulated by the Capital Market Act.

The ruling, therefore, comes as a surprise as it uses categorical expression stating that Luna is not a security, rather than the previous reserved expressions that there is room for dispute on whether or not the Capital Market Act can be applied to Luna. The court also dismissed the prosecutor’s appeal against the decision to dismiss Hyun-seong Shin, former co-CEO of Terraform Labs, for confiscation and preservation of confiscation.

Initially, the prosecution requested confiscation preservation and collection preservation for the property of former CEO Shin. However, the Southern District Court dismissed the request for confiscation preservation, citing that “it is difficult to see that the property subject to the claim is a property acquired by a crime or an asset derived from it.”

Comprehensive analysis of the court’s judgments on the arrest warrant, confiscation preservation, and collection preservation claims suggests that the issue in the trial against former CEO Shin and others is likely to be fraud and breach of trust rather than violation of the Capital Markets Act. The prosecution seems to be focusing on proving Luna’s stockability, but the Supreme Court decision has not yet been issued.

Although some speculate that the U.S. Securities and Exchange Commission (SEC)’s lawsuit against Terraform Labs CEO Kwon Do-hyeong in February on charges of fraud will affect domestic trials, experts believe this is not the judgment of the US judiciary but the SEC’s argument. The SEC sees cryptocurrency as a commodity, and in order for the purchase of cryptocurrency to be an investment contract, it must have the right to share profits.

The court’s judgment that Luna is not a security comes as a surprise, given the previous court trials’ positions on cryptocurrencies. Nevertheless, the prosecution may still focus on proving Luna’s stockability, and it remains to be seen whether the Supreme Court will uphold the lower court’s decision.

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