South Korean police ask exchanges to freeze funds related to LFG

South Korean cryptocurrency exchanges have been notified by the police to seize funds related to the Luna Foundation Guard.

On May 23, 2022, South Korean authorities issued a request to the country's top cryptocurrency exchanges to prevent funds from being withdrawn. Specifically, the Seoul Metropolitan Police Agency requested that any actions by the Luna Foundation Guard be prohibited. Police claim to have found leads that could link the group to embezzlement.

Investors’ portfolios were hit hard when the Terra algorithmic stablecoin crashed earlier this month, causing LUNA to lose more than 99% of its value.

However, this requirement is not a requirement, nor is it enforceable by law. Each exchange can choose how they want to respond, but it is not yet known how they will respond.

Several prominent South Korean investors demanded an investigation into Terraform Labs CEO Do Kwon and filed a lawsuit over the debacle of the UST stablecoin. Therefore, this triggered the restart of the "Grim Reaper", a joint investigation team for South Korea's financial securities crimes.

South Korean lawmakers even met with executives from these exchanges, including Upbit, Bithumb, Coinone, Korbit and Gopax. Because they were not required to comply, the meeting was likely a move to pressure the heads of those exchanges.

According to Newspim, Yoon Chang-Hyeon, chairman of the Korea National Power Virtual Assets Special Committee, said on Facebook, “We will check the investor protection measures of the exchange.”

According to the outlet, it is reasonable to assume that representatives from the exchange will somehow be held accountable for the losses caused to investors by the LUNA crash. Newspim also reported that the South Korean National Assembly is leading the punishment regulations for the incident.

Two of these exchanges have already issued warnings on their websites, with Coinone suspending LUNA trading on May 11 and Binance suspending some spot trading.

While this official report joins the broader development story, the demands on the cryptocurrency exchange and Do Kwon's investigation are not linked. The actions of the Korean National Assembly and Korean authorities clearly demonstrate that South Korea is willing to take the necessary steps to find out the truth about the collapse of the Terra ecosystem.

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