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Cross Trading of LUNA Tokens Uncovered on Three Korean Crypto Exchanges

Policy & Regulation·May 17, 2023, 8:52 AM

According to a report by the Maeil Business Newspaper on Wednesday, it was discovered that cross trading of LUNA tokens took place on three South Korean cryptocurrency exchanges: Bithumb, Coinone, and GoPax.

 

Three crypto exchanges

An indictment by the Seoul Southern District Prosecutors’ Office against Terraform Labs co-founders Do Kwon and Daniel Shin, along with interviews conducted within the cryptocurrency industry, revealed that Bithumb, Coinone, and GoPax were involved in cross trading LUNA tokens with a combined value of $598 million. Specifically, Bithumb accounted for $224 million, Coinone for $299 billion, and GoPax for $74 billion.

The prosecution has confirmed that cross trading continued until the end of February 2022, a period marked by significant demands for virtual asset legislation from both the market and academia. Despite widespread calls for regulations to curb unfair trading practices, these instances of cross trading went undetected.

 

Classification of LUNA

Moreover, it is reported that legal punishment for the $598 million worth of cross trading is challenging unless LUNA tokens are officially recognized as securities by the court. Under the Korean Capital Markets Act, only cross trading involving tokens identified as securities can be subject to penalties as a form of market manipulation.

During a plenary session of the National Assembly’s Legislation and Judiciary Committee on Tuesday, Justice Minister Han Dong-hoon made a statement suggesting that LUNA tokens could be considered securities due to their backing by real-world assets. However, he said that this distinction might not apply to other tokens.

On April 25, the Seoul Southern District Prosecutors’ Office indicted Shin and others as accomplices to Kwon, assuming that LUNA tokens were indeed securities. This case now revolves around whether the prosecution can successfully establish the classification of LUNA tokens as securities during the trial, making it the central issue in the case.

Photo by Kanchanara on Unsplash

 

Crypto investor protection legislation

Last Thursday, the National Assembly’s National Policy Committee approved a bill known as the “Virtual Assets User Protection Act,” signaling an accelerated legislative process. However, there are arguments suggesting that the definition of cross trading should be further clarified in either the legislation or enforcement decree.

A representative of a law firm specializing in virtual assets stated that the implementation of the User Protection Act would take another year even after its promulgation, making it challenging to retrospectively penalize cross trading practices that had already occurred.

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