Declining Users and Sexual Predators Threaten Korean Metaverses; 3AC Takes Legal Action Against Terra: Asia Update

This weekly summary highlights significant developments in the Asian blockchain and crypto industry.

Closure of South Korean Metaverse Platforms Amid Scandals and Declining Interest

With a technologically savvy populace, rapid internet access, and a strong gaming tradition, South Korea was once a prime environment for metaverse innovations. However, several notable metaverse platforms are facing closure, signaling a troubling trend.

One recent example is 2nd Block, created by Dunamu, known for managing South Korea’s leading cryptocurrency exchange, Upbit. Dunamu announced that its metaverse services will cease on September 9 due to a lack of user engagement post-pandemic.

This decision follows the Seoul government’s announcement to shut down its own virtual project, which involved a $4.5 million investment. The digital version aimed at enhancing interaction and exploration among residents and tourists lasted under two years.

Others in the space, like Zepeto developed by Naver, are encountering problems as well. Zepeto has found some success in international markets, registering 20 million overseas monthly visitors compared to merely 1.2 million within South Korea, according to Sensor Tower.

However, Zepeto has attracted controversy after reports surfaced from parents about instances of sexual harassment involving minors on the platform.

In some alarming cases, minors were allegedly manipulated into sharing explicit content in exchange for in-game items.

In response, lawmakers in South Korea have proposed stricter penalties for virtual sexual offenses, although the bill did not advance in the National Assembly, leaving many concerns unaddressed.

Many cases remain unresolved as tracking offenders in global digital environments proves challenging.

Liquidators of 3AC File $1.3 Billion Lawsuit Against Terraform Labs

The liquidators for the now-defunct Singapore-based hedge fund Three Arrows Capital (3AC) have initiated a $1.3 billion lawsuit against Terraform Labs.

In the court documents, liquidators Russell Crumpler and Christopher Farmer from Teneo Holding accuse Terraform Labs of misleading 3AC regarding the stability of its algorithmic stablecoin, TerraUSD (UST), and its counterpart LUNA, which led to significant investments in these assets.

The liquidators are pursuing compensation for not only the direct acquisitions of UST and LUNA but also the catastrophic losses incurred by 3AC due to the subsequent collapse of Terra.

The downfall began in May 2022 when UST lost its peg to the U.S. dollar, resulting in a staggering $40 billion loss within the Terra ecosystem.

Despite assurances from Terraform’s co-founder Do Kwon, the failure of the stablecoin caused a ripple effect throughout the crypto market, ultimately resulting in 3AC filing for bankruptcy in July 2022.

Once managing assets up to $18 billion, 3AC claims that the Terra collapse inflicted irreparable financial damage.

Terraform Labs sought bankruptcy protection in January 2024 and later settled a civil suit with the SEC for $4.47 billion in June.

Kwon was found guilty of investor fraud by a U.S. jury in April 2024 and is currently in Montenegro as extradition discussions continue. Recently, the Montenegrin Supreme Court has delayed his extradition to South Korea.

Malaysian Police Conduct Manhunt After Cryptocurrency Kidnapping

Authorities in Malaysia are actively pursuing four suspects tied to the kidnapping of a Chinese national and a Malaysian citizen who were taken on July 11 and released four days later after a cryptocurrency ransom was paid, as reported by state news outlet Bernama.

The suspects are part of a total group of 18 individuals involved in the kidnapping. In August, a confrontation with the police resulted in four suspects being shot dead, while ten others were taken into custody. A chauffeur of the male victim was among those implicated.

The ransom, estimated at $1.2 million in cryptocurrency, was allegedly distributed among the captors after the victims were freed.

On August 15, six arrested individuals pleaded not guilty under Malaysia’s Kidnapping Act, with potential sentences reaching 40 years in prison along with corporal punishment.

During the ongoing investigation, police seized 1.65 million Malaysian ringgit (approximately $372,500) in cash and other properties, including vehicles valued at around $700,000.

SBI Holdings Reinforces Partnership with Ripple

SBI Holdings, the parent organization behind Japan’s largest online brokerage SBI Securities, has announced a new alliance with Ripple Labs aimed at enhancing the use of non-fungible tokens (NFTs) on the XRP Ledger (XRPL).

This partnership will focus on educating community members about digital asset transactions on xrp.cafe, an NFT platform on XRPL.

This is not SBI’s first engagement with Ripple; the company’s remittance division, SBI Remit, has utilized XRP for international transactions since 2017, positioning it among the early adopters of Ripple’s technology.

Moreover, SBI became the first Japanese entity to leverage XRPL supply chain services back in April 2024.

Ripple is currently wrapped up in a lengthy legal battle with the SEC in the United States.

In a recent ruling on August 7, U.S. Judge Analisa Torres mandated Ripple to pay a $125 million civil penalty, a much lesser amount than the $2 billion initially sought by the SEC.