Terra market collapse and tax obligations force South Korea to rethink

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South Korea’s National Assembly and government are reportedly considering tougher crypto legislation following an emergency investigation into Terra’s market crash.

Local reports indicate that the regulation of virtual assets will go beyond capital market law with higher penalties. The report explains that unfair profits from cryptocurrency pump-and-dump, price manipulation, illegal trading, insider trading, and sham trading will result in both civil fines and jail time.

Civil and Criminal Action for Crypto Crimes

Along with strong disclosure guidelines, the new Virtual Property Industry Act also offers a licensing regime for foreign companies. Under this, companies like Terraform Labs with national subsidiaries would be subject to national guidelines.

The Financial Services Commission report also claims that the barriers to entry for crypto businesses will be higher than the reporting requirements of the current law.

A separate entity, the Digital Asset Management Institute, will manage white papers and disclosure reviews, the report points out. Further adding, “A Qualified Issuer system for coins will also be introduced which imposes obligations to write, notify and disclose a white paper on coins.”

The new authorization and registration system also aims to differentiate the risk of virtual assets and the type of business activity.

The report further notes, “This means that exchanges that trade and deal in cryptocurrencies or operators that deal in high-risk products must issue stricter authorization.”

Terra Collapse Triggers Lawsuits and Tax Claims

Amid the market crash of TerraLUNA and UST, the South Korean administration is also reportedly considering controlling the issuance and circulation of stablecoins.

Meanwhile, another report pointed out that a special unit called “Yeouido Grim Reaper” has been resurrected to investigate Terra.

The Joint Financial and Securities Crimes Investigation Team was officially launched on May 18 to investigate the methods used by TFL to lure investors.

The team would also suspect Terra of being a Ponzi scheme.

Investors in LUNA and Terra USD (UST) are filing a class action lawsuit against Terraform Labs CEO Do Kwon, a South Korean citizen, for alleged fraud. They would also prepare for a provisional seizure of his property.

Meanwhile, the National Tax Service is reportedly seeking 100 billion won or $78.5 million in taxes from CEO Kwon, other senior executives, and Terraform Labs.

The Naver news agency claimed that just before the lunar market crash, CEO Kwon was trying to liquidate his domestic stake and move overseas, in an alleged tax evasion attempt.

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