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| The logo of Upbit is displayed in front of its headquarters in Seoul, July 20, when the prosecution launched an investigation into local crypto exchanges. Yonhap |
By Lee Min-hyung
Cryptocurrency exchanges here are keeping a low profile as the prosecution intensifies its investigation into their trading records on the ill-fated stablecoin Terra and its sister token Luna.
The probe was targeted on Korea's seven main crypto exchanges including Upbit and Bithumb. The prosecution searched their headquarters for three days from July 20 to seize their trading records of the two controversial coins that saw their values plummet abruptly in May.
Dumanu, the operator of the nation's largest exchange Upbit, is at the center of the investigation, as Dunamu & Partners ― the investment arm of Dunamu ― acquired 20 million Luna coins in 2018 and sold them all of them in February 2021. The company generated a profit of 130 billion won by trading Luna.
But Dunamu and other exchanges argued that there was no suspicious internal trading surrounding the cryptocurrency.
"Dunamu & Partners invested in Luna in April 20, 2018, as the Luna project drew global acclaim from major overseas digital asset investors such as Coinbase Ventures and Polychain Capital," a spokesman at Dunamu said.
Crypto exchanges are staying low key in response to the external uncertainty, with their leaders reducing public appearances. A freezing market sentiment also adds more concern to their earnings performance this year.
"Most major exchanges here and abroad listed Terra and Luna coins due to their rapid growth, and few industry insiders predicted the possibility of their sudden demise," an industry source said. "But after the scandal erupted, exchanges share some blame. It was realistically impossible to preemptively detect any signs of their collapse."
Luna's market capitalization once topped 50 trillion won before the debacle. As the cryptocurrency was developed by Terraform Labs, co-founded by Korean entrepreneur Do Kwon, a number of Korean investors engaged in a buying spree of the coin for the past few years.
Kwon did not make any public appearances after the Luna collapse, only communicating with investors via an online channel. He is known to be abroad, but his specific whereabouts remain unknown. The prosecution has already summoned employees and executives of Terraform Labs.
An official from a local exchange said most exchanges here have no choice but to keep a low profile amid the prosecutors' escalating investigation.
"We do not have any comments on the prosecution's recent seizure of our trading records on Luna due to the ongoing investigation," the official said. "Exchanges will have to keep maintaining a low profile, as it appears it will take some time for the investigative authorities to confirm the whereabouts of the main figure behind the scandal."
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