South Korean police have reportedly asked cryptocurrency exchanges to freeze assets held by the Luna Foundation Guard (LFG), the nonprofit established to support the Terra (LUNA) ecosystem.
A report published Monday by Korean national broadcaster KBS says the cybercrime division of the Seoul Metropolitan Police Agency sent letters to several exchanges, requesting they block withdrawals of corporate funds linked to LFG.
Investigators from the 1st Cybercrime Investigation Unit told KBS they believe funds embezzled in connection with the recent LUNA collapse are being stored in LFG accounts, which is why they urged exchanges to impose freezes.
Exchanges not legally required to comply
Despite the police request, the report notes that exchanges are not under a legal obligation to act. With no current legal mandate to enforce such freezes, exchanges can decide independently whether to restrict withdrawals or take other measures.
The LUNA token and the TerraUSD (UST) stablecoin collapsed dramatically this month. UST lost its peg to the dollar and effectively dropped to zero, while LUNA’s price plunged, wiping out value and prompting lawsuits against Terraform Labs as well as potential regulatory responses from lawmakers, including in South Korea.
Questions remain about how LFG managed the reserves it controlled. The foundation has said it deployed substantial bitcoin reserves—reportedly around 80,000 BTC—in attempts to defend UST’s peg.
In an update on May 16, the Luna Foundation Guard disclosed its reserve balances, listing holdings that included 313 BTC, 39,914 BNB, 1,973,554 AVAX, approximately 1.8 billion UST, and more than 222 million LUNA.
1/ As of Saturday, May 7, 2022, the Luna Foundation Guard held a reserve consisting of the following assets:
· 80,394 $BTC
· 39,914 $BNB
· 26,281,671 $USDT
· 23,555,590 $USDC
· 1,973,554 $AVAX
· 697,344 $UST
· 1,691,261 $LUNA— LFG | Luna Foundation Guard (@LFG_org) May 16, 2022