The global financial situation is bleak at the moment. The cryptocurrency industry has suffered the most, and its consequences have been harsh. The Terra LUNA and UST market crashes have devastated investors. Do Kwon, the founder’s ethnicity being South Korean, has left the government of South Korea to handle the aftermath.
South Korean government revives the Grim Reapers to look into Terraform Labs
Following an emergency investigation into the Terra market collapse, South Korea’s National Assembly and the administration are reportedly considering more stringent crypto laws. The South Korean government is doing everything to recover from the Terra market collapse and find out what went wrong in Terra’s LUNA and UST.
After two dormant years, the new South Korean President has reassembled the feared investigative and prosecutorial team to investigate the mess created by Terraform Labs. As the South Korean government resurrects the dormant Grim Reapers of Yeoui-do to look into Terra’s collapse, legal difficulties are accumulating for Do Kwon, the co-founder of failed Terra crypto project.
The task force, by law, is made up of staff from several financial watchdogs. It’s in charge of investigating and prosecuting securities fraud and anticompetitive trading tactics. Co-founders Do Kwon and Shin Hyun-Seong and key members of the Terra team might be exposed.
According to a Korean news outlet, the Terra case would be the first investigated by the resurrected Securities Crimes Joint Investigation Team. A team member told SBS News that the Terra case caused significant damage to average citizens, therefore making this the initial investigation by the Grim Reapers into the crypto sector.
Many South Koreans have long feared the reassembling of the intimidating investigation team. The new conservative President Yoon Seok-yeol may be attempting to correct this mistake. He’s scrapping the previous Moon Jae-in administration’s decision to disband it. The Grim Reapers’ involvement in Terra makes the severity of the Terra situation evident because it will be the first case handled by the investigators in two years.
Do Kwon’s situation has now taken a turn for the worse. If Do Kwon gets discovered guilty, things aren’t looking too good for him. According to reports, the team thinks Terra may have been operating a Ponzi scheme. Moreover, this is fantastic news for investors in Terra.
The name “The Grim Reapers” was given to the team because of its high-profile cases. The $1.2 billion Lime Asset Management fraud was one of the team’s most prominent cases. The team got disbanded before the investigation got concluded. Therefore the South Korean government will reopen that case. From 2013 to 2020, the squad has made 965 arrests and 346 cases prosecuted.
On May 8, Terra had a market capitalization of $24.8 billion, but it is now worth $959 million, according to CoinGecko. Kwon has been blamed by many in the community for the project’s failure. In South Korea, a group of Terra investors is preparing to sue Kwon in civil and criminal court for damages and seek the seizure of his assets.
Kwon’s legal issues go beyond South Korean borders. Last week, a resident of Singapore sued Kwon on behalf of at least 1,000 other residents who invested in the Terra ecosystem, making Kwon face charged for securities fraud in Singapore.
South Korea considers stricter crypto regulations
The South Korean government is reportedly considering more stringent crypto legislation and licensing rules for domestic and foreign players. According to local reports, the virtual asset regulations will be expanded beyond the Capital Market Act with increasingly severe penalties.
The report specifies that civil and criminal penalties will get levied against those who engage in unfair profits from cryptocurrency pumps and dumps, price manipulation, illegal trading, insider trading, and wash trading. The South Korean government is also considering regulating the production and circulation of stablecoins amid the TerraLUNA and UST market collapses.
The new Virtual Property Industry Act includes stringent disclosure standards as well as a licensing system for foreign businesses. According to this report, companies like Terraform Labs with domestic affiliates would be subject to domestic rules. The Financial Services Commission’s report claims that the barriers to entry for crypto businesses will increase above the existing legal reporting requirements.
The Digital Asset Management Institute will manage the new system as a separate entity, according to reports. This institute will handle white papers and disclosure reviews. The new authorization and registration system also wants to make it easier to distinguish between the risk of virtual assets and some business behavior.
As the old saying goes, when it rains, it pours. Founder Do Kwon has now come under further investigation from South Korea’s authorities amid allegations of tax evasion in the aftermath of the Terra affair.
The Tax Service of South Korea is seeking over $100 million in unpaid taxes from Kwon and Terraform Labs. According to reports, the country’s tax authorities have charged Terraform Labs and its CEO for evading income and corporate taxes. In December 2021, Kwon and Terraform were dissatisfied with the country’s tax plan. He even attempted to liquidate a domestic company to relocate to another country before the LUNA collapse. This has increased the likelihood that Kwon is avoiding taxes.
For nearly two weeks, the cryptocurrency market slump has been a talking point, with many feelings represented. Crypto advocates remain steadfast in their optimism that the market will recover. On the other hand, some investors have lost confidence in the industry and liquidated their crypto assets. On the other hand, lawmakers are using Terra’s failure to push for more stringent crypto regulation, and such is South Korea.