South Korean prosecutors investigating the collapse of Terra-Luna are mulling another request for the issuance of an arrest warrant for Terraform Labs Pte. Ltd., cofounder Daniel Shin and seven others, after the local court dismissed an initial request last Friday.

“It is difficult to accept that the [court] dismissed the warrant to guarantee the rights of suspects who took astronomical amounts of profits while acknowledging the heavy burden of the crime against innocent investors,” Choi Sung-kook, prosecutor at Seoul Southern District Prosecutors’ Office told Forkast via text message.

On Dec. 2, Seoul Southern District Court’s presiding judge of warrants Hong Jin-pyo reviewed the arrest warrant on eight Terra associates that the prosecutors requested on Nov. 29. 

Hong dismissed the request the next day, reportedly because he deemed the accused to be at low risk of fleeing or destroying evidence in light of their cooperation with the investigation so far.

Prosecutors will examine the rationale behind the dismissal and determine whether to request the warrant again, Choi told Forkast.

South Korean prosecutors want to charge Shin and seven other early investors and former engineers of Terra with fraud, violation of the Capital Markets Act and the Electronic Financial Transactions Act, and breach of duty.

Prosecutors accuse Shin of making illegitimate profits of over 140 billion Korean won (US$106 million) through the LUNA cryptocurrency, promoting the Terra stablecoin as a payment method despite multiple warnings from regulators, and misusing users’ private information of Chai Corporation to promote Terra-Luna. Shin founded and served as CEO of payments tech firm Chai from 2019, but reportedly stepped down earlier this year.

Shin has denied such allegations, saying he sold over 70% of his Luna holdings before the price surge, and still held a significant amount of LUNA during the collapse in May. He also claims that the financial authorities have never expressed their disapproval for incorporating crypto in e-commerce payments.

Terraform Labs has repeatedly stated that South Korea’s investigation on Terra-Luna has become highly politicized, and claims the accusations are baseless.

“The Seoul Southern District Court’s ruling on Dec. 3 to reject South Korean prosecutors’ [arrest] warrant requests for former Terraform Labs employees once again illustrates the unfounded nature of the prosecutors’ claims,” a Terraform Labs spokesperson told Forkast via email on Monday.

Terraform Labs cofounder and CEO Do Kwon, whose real name is Kwon Do-hyung, also shared the news report of the court decision on his official Twitter account. “Strike 2”, he wrote with a thumb-up emoji, in apparent reference to the difficulty that South Korean prosecutors have encountered in obtaining their arrest warrant on Terra associates.

In October, the prosecutors arrested Terraform Labs’ head of general affairs Yoo (full name not revealed) for allegedly using bot programming to manipulate the market price of Luna cryptocurrency. But Yoo was released the next day as Judge Hong dismissed the prosecutors’ warrant to investigate him in custody. 

Prosecutors began investigating Terraform Labs and its associates in May after five South Korean investors filed a complaint against cofounders Shin and Kwon.

Initial charges centered around fraud but prosecutors have added the alleged violation of the Capital Markets Act, after deciding that Terra’s Luna cryptocurrency was an unauthorized investment security.

Despite various efforts to locate and bring Do Kwon back to South Korea – including an arrest warrant, an Interpol “red notice” and nullifying his Korean passport – the Terraform Labs CEO’s exact location remains unknown.

Local prosecutors declined to comment on the progress of Kwon’s arrest but previously confirmed with Forkast that he has moved from his residence in Singapore to an unspecified country in Europe via Dubai.

Kwon, however, states that he is making “zero efforts to hide” and is willing to cooperate with any government agency that wants to communicate.

Terra’s algorithmic stablecoin and Luna cryptocurrency, which was created to maintain the U.S. dollar peg of the stablecoin, fell into a death spiral as the dollar alternative started to lose its peg on May 7. In less than a week, Luna’s price plunged from around US$80 to a few cents, resulting in losses for hundreds of thousands of investors worldwide. South Korean authorities estimate that over 280,000 investors were affected.