South Korean Exchanges in Talks with Government as Luna Investigation Continues
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South Korean Exchanges in Talks with Government as Luna Investigation Continues

Local crypto exchanges may be held liable by South Korean regulators for failing to protect investors from Terra's collapse.
Neither the author, Kingsley Alo, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

The recent Terra ecosystem collapse continues to throw more twists and turns even as the crypto market reels from its effects. Emerging reports from South Korea suggest that the ruling party will hold an emergency meeting with the country’s five leading crypto exchanges today.

In an entirely new twist, South Korean authorities can also potentially hold the exchanges accountable for failing to protect investors during Terra’s demise. The report reveals they will be held liable for some of the losses incurred by Terra investors due to the network’s demise.

Seoul Takes Luna Investigation to Next Level

Earlier, Seoul’s government had launched an investigation into the Luna demise. They had requested local exchanges to submit detailed information regarding TerraUSD and Luna transactions on their platforms. Some of the details asked included trading volumes, closing prices, and the number of relevant investors.

However, it seems the government may be turning the screw tighter following the severity of the losses incurred by Korean Investors. In attendance at the emergency meeting will be representatives of Upbit, Bithumb, Coinone, Korbit, and Gopax. Top of the agenda would be the consequences of Terra’s $40 billion collapse.

Accordingly,  Yoon Chang-Hyeon, chairman of the parliament’s special virtual assets committee, revealed that the parliament would assess investor protection measures implemented by the exchanges. Previously, Chang-Hyeon highlighted concerns about the local exchanges’ response to Terra’s collapse. He hinted that high trading volumes and transaction fees may have driven exchanges to keep LUNA and UST trading open to the detriment of investors.

Meanwhile, the South Korean government is taking active steps to prevent a reoccurrence of the Terraluna debacle. The financial regulators are undertaking emergency investigations into the country’s 34 crypto-related enterprises. These include 26 crypto exchanges and eight crypto wallet and security management firms. According to reports, these platforms are being evaluated to ensure that relevant anti-money laundering and investor protection systems have been implemented.

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South Korean Police Request Freezing of LFG’s Assets

In another development, the South Korean police have ordered local exchanges to freeze the account of the Luna Foundation guard. The foundation behind the Terra ecosystem is believed to have handled funds related to embezzlement. 

However, the police request for a freeze is not mandated by law. Therefore, the exchanges are left to carry out the order at their discretion. This makes it unclear to what degree the LFG funds could be frozen.

Meanwhile, Do Kwon, Terra’s CEO, continues to be investigated on the grounds of running a Ponzi scheme. The embattled CEO’s case has not been helped by an old video that resurfaced of him alluding to a kill switch within the Terra protocol.

According to reports, the unsustainable high fixed interest rates on UST deposits using Anchor Protocol are being considered a Ponzi scheme. This has led Prosecutors in South Korea to consider charging Do Kwon with Ponzi fraud.

Coincidentally, a group of South Korean investors filed a criminal complaint against Kwon and his co-founder, Daniel Shin, last week. According to the report, the affected investors are seeking a provisional seizure of his property. Despite his legal woes, Do Know is also expected to be present today at the Parliament’s hearing.

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Do you think Do Kwon and the LFG are complicit in the demise of the Terra ecosystem? Let us know your thought in the comment below.