The next trial of Daniel Shin, also known as Shin Hyun-seong, the co-founder of Terraform Labs, is anticipated to be a contentious one in court, according to reports from the South Korean media sources Chosun Ilbo and EToday. Despite the fact that South Korean law does not yet designate any cryptoasset as a security, prosecutors are eager to show that the cryptocurrency Terra Classic (LUNC) is one.
Prosecutors are attempting to show that Shin knew LUNC (formerly LUNA) was a security when he offered tokens to investors in order to prove fraud claims against him. Although Shin has said that he left the Terraform project two years after it was launched in Singapore, video interviews shot only weeks before the catastrophe appear to indicate that the Terra ecosystem and his payments company, Chai Corporation, had been working together for some time.
In the event that the prosecution is successful in persuading a district court that LUNC is a security, Shin’s legal team will have the option to prosecute the case at a subsequent high court trial. The matter may be taken to the Supreme Court if that fails. Additionally, prosecution authorities have the right to appeal judgments, which means that the legal conflict might go for months. If the prosecution wins, Do Kwon, a co-founder of Terraform with Shin, would probably face identical accusations.
Kwon is now undergoing trial for allegedly traveling to Montenegro with fake papers. He was detained at Podgorica Airport while trying to board a private jet with Han Chang Joon, a top executive of both Chai and Terraform. Kwon has refuted the claim that LUNC is a security and voiced worry about the politicization of his case. Officials from the prosecution are aggressively working to get him deported to South Korea.
Shin’s prosecution has been complicated by the fact that the first efforts to get an arrest warrant were turned down in December of the previous year. They persisted nonetheless, acquiring information from Chai and carrying out a raid on Shin’s house. When it was found that the presiding judge had previously conducted an interview with Shin as a reporter, the first trial date—originally scheduled for May 26—was postponed. As a result, a new judge was appointed and the trial was postponed.
Both Shin and the prosecution have asked for written opinions from experts to show that LUNC is a security. It is acceptable to consider both LUNC and the USD-pegged stablecoin UST to be securities, according to a “capital markets” expert who must remain nameless and who was contacted by the prosecution. To support their case, the prosecution is, however, largely focused on demonstrating LUNC’s security status. The issue at hand is whether Shin violated the Capital Markets statute, since doing so would necessitate classifying LUNC as a security as the statute does not yet include any explicit provisions for cryptocurrencies.
Prosecutors are hopeful that the current litigation between Terraform and the US Securities and Exchange Commission (SEC) would have an impact on the court’s ruling. The SEC has designated LUNC and Terra as “cryptoasset securities” and is now involved in a court dispute over the security classification of XRP. On the other hand, Shin’s legal team will probably cite a decision made by a judge in the Seoul Southern District Court in April of the current year that said that LUNC cannot be regarded as a security.
The result of the trial is still up in the air as it draws near, and the legal struggle between Shin and the prosecution may have important ramifications for how cryptocurrencies are categorized under South Korean law.
