South Korea May Hold Exchanges Accountable For Terra Crash

South Korea’s ruling party has reportedly arranged an emergency meeting to take place Tuesday with representatives from the country’s five largest cryptocurrency exchanges. The authorities are expected to hold the exchanges responsible for failing to protect investors during Terra’s collapse.

South Korea Continues Probes Into Terra Crash

South Korean crypto exchanges could be held responsible for some of the damage Terra investors suffered due to the network’s collapse. 

According to a Monday report from the local outlet Newspim, South Korea’s ruling party has scheduled a May 24 emergency party meeting with representatives from the top five local crypto exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax, to discuss the consequences of Terra’s $40 billion collapse. Per the report, it is expected that the exchanges will be held accountable for failing to implement adequate investor protections and prevent damages to their clients during the crash.

“We will check [the exchanges’] investor protection measures,” Yoon Chang-Hyeon, a member of South Korea’s ruling party and chairman of the parliament’s special virtual assets committee, said in a Monday Facebook post. Previously, Chang-Hyeon, who pushed for an emergency National Assembly hearing on Terra last Tuesday, raised questions regarding the local exchanges’ response to Terra’s collapse, implying that high trading volumes and transaction fees may have incentivized the exchanges to keep LUNA and UST trading open despite the apparent risks for their customers.

In the meantime, South Korea’s financial regulators are conducting emergency probes into all 34 crypto-related businesses in the country, including 26 crypto exchanges and eight crypto wallet and security management companies. According to Newspim, they are assessing whether the exchanges have adequately implemented all necessary anti-money laundering and investor protection mechanisms.

According to local news sources, Terraform Labs CEO Do Kwon, who has reportedly been invited to the emergency party hearing, is under investigation by the Seoul Southern District Prosecutors Office on suspicions of running a Ponzi scheme by promoting unsustainable yields on UST deposits via Anchor Protocol. The investigation comes after South Korean investors announced their plans to Kwon and his co-founder, Daniel Shin, for fraud and other financial violations over Terra’s collapse.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.