Binance is facing tough questions as international law enforcement demands its cooperation on the Terra Luna case.
The exchange would do well to comply with South Korean prosecutors demanding the freezing of assets owned by indicted Terra Luna founder Do Kwon, says New York-based analytics firm MyChargeBack.
Binance Should Not Upset South Korean Authorities, Says Expert
Kwon is currently detained in Montenegro for passport fraud. South Korean authorities asked Binance to prevent Kwon from liquidating his crypto.
So far, Binance has said it responded to prosecutors but could not comment on an ongoing investigation. Prosecutors suspect that Kwon converted assets on Binance into Bitcoin.
MyChargeBack cryptocurrency investigator Evan Spicer said Binance would do well to cooperate with the South Koreans who have close U.S. ties.
“Binance has really made an effort to move out of the U.S. as much as possible to try and protect itself. So it is not going to want to cross any of its other host countries the wrong way, especially not one that is close to the U.S. like South Korea.”
Spicer estimates that Kwon’s Bitcoin is worth “billions,” considering that the TerraUSD stablecoin he created was one of the most widely-circulated cryptocurrencies.
The coin relied on an arbitrage mechanism with a sister coin to keep its value at $1. The system crashed spectacularly in May last year, losing investors at least $40 billion.
South Korean prosecutors have charged Kwon with violating South Korea’s capital markets law. The U.S. Securities and Exchange Commission has charged him with eight counts of fraud related to U.S. investors.
Spicer expects Kwon to use his considerable resources to oppose extradition and flee to Africa or Dubai.
Changpeng Zhao Should Watch Do Kwon’s Case Closely
Spicer argued that Binance CEO Changpeng Zhao should watch Kwon’s case for clues.
The U.S. Commodity Futures Trading Commission (CFTC) charged Zhao, Samuel Lim, and Binance for coaching U.S. market makers to bypass geographical restrictions restricting access to Binance’s derivatives trading desk.
The CFTC is in talks with Binance, though no formal agreement has yet been reached.
Spicer added that South Korea must quickly craft crypto regulations to discourage scammers escaping the SEC hammer in the U.S. from targeting the nation.
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