Search and Seizure Included... Only Bad News Piling Up for Cryptocurrency Exchanges

Prosecutors Investigating Luna Incident
Conduct Surprise Raids on 15 Locations Including 7 Exchanges Such as Upbit

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Cryptocurrency exchanges are facing a series of adverse events. Along with the cryptocurrency market entering a downturn, the prosecution investigating the Luna (LUNC) incident has conducted a sudden raid, putting the industry in crisis.

According to CoinMarketCap, a global cryptocurrency market tracking site, the total market capitalization of cryptocurrencies, which was $2,252,330,860,000 (approximately 2,957.31 trillion KRW) at the beginning of January this year, decreased to $1,041,259,900,000 (approximately 1,367.52 trillion KRW) as of 6 a.m. on the 21st.

Until November last year, the coin market experienced an unprecedented boom, but it shrank due to high inflation, economic recession, and the Luna incident. As a result, the performance of domestic exchanges also showed red flags. Dunamu, which operates Upbit, the market leader, reported first-quarter sales this year of 426.9 billion KRW, down 28.63% year-on-year, and operating profit fell even more sharply by 48.89% to 287.9 billion KRW. Bithumb Korea's sales dropped 50.12% to 124.8 billion KRW, and operating profit decreased 61.19% to 84.5 billion KRW.

In addition to the cryptocurrency market downturn, trust was also damaged. When the Luna incident occurred, exchanges did not delist the coin, leading to claims that they were collecting fees. Furthermore, it was alleged that Dunamu’s wholly owned subsidiary, Dunamu & Partners, earned over 100 billion KRW in profits from Luna investments, prompting efforts to clarify the situation.

In this context, the Seoul Southern District Prosecutors’ Office’s Joint Financial and Securities Crime Investigation Team executed search warrants on 15 locations, including seven domestic exchanges such as Upbit, compounding the negative impact on exchanges. The team is also reported to have conducted raids on related companies such as Terraform Labs, the issuer of Luna, Chai Corporation, and Dunamu & Partners. Through the raids, the investigation team secured data related to the trading records of Luna and TerraUSD (UST) involving Terraform Labs CEO Kwon Do-hyung and other executives.