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BlogsFalse Naver Blog Posts Targeting Your Business in Korea: How to Request Removal
When Online Defamation Affects Your Business in Korea In South Korea, Naver remains one of the most influential online platforms for search, blogs, and reputation management. For businesses operating in Korea, what appears on Naver can directly affect customer trust, business inquiries, and brand credibility. In recent years, some businesses have discovered Naver blog posts that mention their company or brand name together with words such as “scam,” “fraud,” or “victim warning.” These posts may appear professional and persuasive, even when the underlying facts are inaccurate, misleading, or unrelated to the business itself. For foreign-owned companies or international businesses operating in Korea, this type of reputational damage can be especially difficult to detect and respond to. The content may be written in Korean, indexed on Naver, and viewed as credible by local customers before the company becomes aware of it. Under the Act on Promotion of Information and Communications Network Utilization and Information Protection (the “Network Act”), a business whose reputation or other rights have been infringed online may request deletion of the content or temporary blocking of access to the content. Applicable Law ▪️Article 44-2 of the Network Act: Deletion Requests and Temporary Measures Article 44-2(1) of the Network Act provides that a person whose rights, including privacy or reputation, have been infringed through information distributed via an information and communications network may request the relevant service provider to delete the information or publish a rebuttal. Under Article 44-2(2), once such a request is received, the service provider must take necessary measures, such as deletion or temporary blocking, without delay and notify both the requester and the person who posted the content. Where it is difficult to determine whether a rights infringement has occurred, or where a dispute between the parties is expected, Article 44-2(4) allows the service provider to temporarily block access to the content. The duration of such temporary measures may not exceed 30 days. ▪️Criminal Liability for Online Defamation If an online post contains false statements of fact that damage another person’s or company’s reputation, Article 70(2) of the Network Act may apply. The statutory penalty is imprisonment for up to seven years, disqualification for up to ten years, or a fine of up to KRW 50 million. Even if the statements are true, Article 70(1) may still apply if the post was made with intent to defame. In that case, the statutory penalty is imprisonment for up to three years or a fine of up to KRW 30 million. Category Legal Basis Possible Penalty Defamation by false statements of fact Network Act, Article 70(2) Up to 7 years’ imprisonment or KRW 50 million fine Defamation by true statements of fact Network Act, Article 70(1) Up to 3 years’ imprisonment or KRW 30 million fine Civil damages Civil Act, Article 750 Compensation for financial and reputational harm Criminal liability depends on the specific content, context, and intent behind the post. However, a business may still pursue platform-level removal or temporary blocking even where the criminal threshold is not yet clear. Key Legal Issues ▪️Scope of Defamation Under Article 44-2 The standard for requesting deletion or temporary blocking under Article 44-2 is broader than the standard for criminal defamation under Article 70 of the Network Act or Article 307 of the Criminal Act. In practice, the key issue is whether the online post infringes the company’s rights, including its reputation. It is not always necessary to prove criminal intent at the initial platform reporting stage. For example, if a Naver blog post places a company’s brand name next to terms such as “scam” or “fraud,” while the actual content concerns an unrelated impersonator or third party, the overall impression created for ordinary readers may still be misleading. In some cases, this may support a removal or temporary blocking request. Evidence of reputational harm is also important. Businesses should preserve records showing the impact of the post, such as customer complaints, cancelled inquiries, KakaoTalk messages, emails, screenshots, call logs, and changes in online search results. ▪️What Happens If the Poster Files an Objection If the person who posted the content files an objection, the temporary blocking may remain in effect for 30 days from the date the objection is received. After that period, the post may be restored. In that situation, the affected business may consider filing a defamation mediation request with the Korea Communications Standards Commission’s Internet Harm Relief Center. If mediation is successful, the settlement may have an effect similar to a civil settlement agreement. The Limits of Platform Reporting Alone Filing a removal request through Naver’s Rights Protection Center is an important first step, but it may not fully resolve the problem. If the poster files an objection, the content may be restored. If similar posts are uploaded again under different accounts or URLs, each post must usually be addressed separately. Where harmful posts are being published repeatedly or systematically, platform reporting alone may not be enough. In such cases, a formal letter of demand issued in the name of a Korean law firm, together with potential criminal complaints or civil damages claims, may be more effective. How Decent Law Firm Can Assist Responding to false or misleading online content in Korea requires more than simply submitting a platform report. Businesses must consider the wording of the removal request, the legal basis for rights infringement, the preservation of evidence, and the possibility of further civil or criminal action. Decent Law Firm assists businesses with each stage of this process, including removal requests, formal letters of demand, Korea Communications Standards Commission proceedings, criminal complaints, and civil damages claims where appropriate. If you have identified Naver blog posts or other online content that may be harming your business in Korea, please share the relevant URLs and a brief explanation of the impact. We will review the matter and advise on the most appropriate course of action. ※ This content is provided for general informational purposes only and does not constitute legal advice in relation to any specific matter.
2026-05-28 Naver Blog -
Blogs
Sexual Grooming Offenses and Article 15-2 of Korea's Juvenile Protection Act
Recent years have seen a sharp rise in cases involving the online sexual grooming of minors through social media platforms such as Twitter (X) in South Korea. Article 15-2 of the Act on the Protection of Children and Youth from Sexual Abuse (hereinafter "the Act") was enacted in March 2021 and amended in April 2025. Criminal liability can arise even where no in-person meeting or sexual act takes place. Applicable Law Article 15-2 of the Act prohibits the following conduct by any person aged 19 or older targeting a child or youth: Repeatedly or continuously engaging in sexually explicit conversations likely to cause humiliation or disgust, or inducing or soliciting a child or youth to engage in sexual conduct. The statutory penalty is imprisonment of up to three years or a fine of up to 30 million Korean won. The April 2025 amendment introduced two significant changes. First, a new paragraph 2 was added covering conduct targeting children under the age of 16. Under this provision, prosecutors are no longer required to prove sexual exploitation as the purpose — the conduct itself is sufficient for criminal liability. This substantially lowers the evidentiary burden for investigators. Second, a new paragraph 3 was added explicitly criminalizing attempted offenses. This means that even where no actual meeting or sexual conduct occurs, criminal liability can still attach. Category Key Content Penalty Repeated sexually explicit messaging (Art. 15-2 §1-1) Sending sexually explicit messages repeatedly Up to 3 years imprisonment or fine up to KRW 30 million Inducement or solicitation (Art. 15-2 §1-2) Proposing meetings or sexual acts Same Victims under 16 (§2, added 2025) No proof of purpose required Same Attempted offenses (§3, added 2025) Includes undercover officer scenarios Punishable as attempt Source: National Law Information Center, Act on the Protection of Children and Youth from Sexual Abuse, Art. 15-2 (amended April 22, 2025) Key Legal Issues ▪️Criminal Liability When the Other Party Is an Undercover Officer Following the April 2025 amendment, Article 15-2 paragraph 3 now explicitly provides for the punishment of attempted offenses. Even where the other party was an undercover police officer and no actual meeting or sexual conduct occurs, there is a clear statutory basis for prosecution. While sentencing courts may consider mitigating factors, avoiding criminal liability altogether is difficult. ▪️Awareness of the Victim's Age Investigators assess whether the suspect was aware — or reasonably should have been aware — that the other party was a minor. Beyond direct statements of age, circumstantial evidence such as writing style, references to school life, and the nature of the platform used can all be relied upon to establish that awareness. ▪️Digital Forensics and Additional Charges When a suspect is investigated for this offense, law enforcement will typically seize and forensically examine their mobile device. In practice, this process has led to additional charges being filed based on unrelated material discovered on the device. Where further offenses come to light, the case may proceed to full criminal trial rather than being resolved through fines or non-indictment dispositions. Sentencing Trends Given that this provision was only recently enacted, there is limited case law to draw from. Based on cases handled to date, matters involving first-time offenders where no actual sexual conduct occurred have in some instances been resolved through fines or non-indictment dispositions. However, outcomes vary significantly depending on how the suspect responds during the investigation, the quality of early legal representation, and the results of forensic examination. As courts continue to handle cases under the amended law, sentencing trends may shift. Decent Law Firm Cases involving online sexual grooming offenses require careful analysis across multiple areas: review of the full conversation history, assessment of age awareness, management of the forensic examination process, and application of the attempt provisions under the amended law. The criminal defense team at Decent Law Firm has been advising clients on matters under the Act on the Protection of Children and Youth from Sexual Abuse from the earliest stages of investigation. If you have received contact from law enforcement or been issued a notice to appear for questioning, it is important to obtain legal advice before responding to investigators or confirming an interview date.
2026-05-26 Naver Blog -
Blogs
Collective Bargaining With Principal Contractors: A Successful Strategy Learned From Department Store and Duty-Free Shop Salesperson Cases
Why This Case Matters Now Sales employees working for brands operating inside department stores and duty-free shops have long been caught between two different “employers.” The tenant company that signed the employment contract paid the wages, but the department store or duty-free operator controlled the actual working conditions — including working hours, days off, customer service methods, and even restroom usage. Even when workers demanded collective bargaining, they were often blocked by the response: “We are not the party to the employment contract.” Labor Relations Commissions also frequently sided with the companies. That barrier began to collapse with a single judgment issued by the Seoul Administrative Court on October 30, 2025. Then, with the revised Labor Union Act taking effect on March 10, 2026, the principle was formally incorporated into the law. Key Legal Principles Recognized by the Court ① The Standard of Substantial Control — Expanding the Concept of “Employer” Beyond Contractual Relationships The court held that the concept of an “employer” should not be interpreted narrowly as merely the direct party to the employment contract. Instead, it should be broadly interpreted to include entities that substantially and concretely control or determine working conditions. This reflects the modern reality in which technological development and evolving labor structures have created various nontraditional employment arrangements where labor is provided without direct contractual relationships. ② Scope of Bargaining Subjects — Even Management-Related Issues May Become Negotiable Matters The court recognized that issues such as: Guaranteeing collective rest rights Protecting customer service workers Use and expansion of workplace facilities constitute matters directly related to improving working conditions and therefore qualify as legitimate subjects of collective bargaining. However, the court also clarified that whether the companies were ultimately required to accept those demands was a separate issue. In other words, the court clearly distinguished between: The existence of a duty to engage in collective bargaining, and An obligation to accept the union’s demands ③ Relationship With the Revised Labor Union Act — Applicability Even Before the Amendment Following the March 2026 amendment to the Enforcement Decree of the Labor Union Act, procedures for handling correction applications relating to bargaining demands against principal contractors were formally established. However, the court held that even without the legislative amendment, the existing interpretation of the Labor Union Act alone was sufficient to recognize employer status for principal contractors exercising substantial control over working conditions. In other words, even before the revised law took effect, lower court decisions had already recognized that a principal contractor could bear collective bargaining obligations where substantial and concrete control over working conditions existed. How to Prepare for Collective Bargaining With a Principal Contractor What Labor Unions Should Review Identifying substantial control by the principal contractor Designing appropriate bargaining agendas Sending and preserving official bargaining requests Utilizing Labor Relations Commission procedures Establishing solidarity and collective action strategies What Employers Should Carefully Consider Compliance with bargaining notice obligations Risks associated with claiming “we are not the employer” Discussions regarding the scope of bargaining subjects If This Is Your First Principal Contractor Bargaining Case Now is one of the most favorable times to demand collective bargaining, as court precedents and Labor Relations Commission decisions continue to accumulate and the revised Labor Union Act has officially taken effect. However, even a single procedural mistake may result in losing the opportunity to exercise bargaining rights. Decent Law Firm provides comprehensive legal support throughout the entire collective bargaining process involving principal contractors, including: Review of employer status issues Design of bargaining agendas Assistance with bargaining demand procedures Representation before Labor Relations Commissions and administrative courts If you are preparing to demand collective bargaining from a principal contractor, or if your bargaining request has already been rejected, now is the time to seek legal guidance and establish the proper response strategy.
2026-05-21 Naver Blog -
Blogs
Bitcoin and Drug Transactions in Korea — Applicable Laws and Legal Considerations
This article explains the laws that apply when Bitcoin or other cryptocurrency is used as a means of transferring drug transaction payments, or when drug-related funds flow into a cryptocurrency over-the-counter (OTC) operation. It also outlines how Korean investigative authorities assess culpability and what legal issues arise in these cases. 1. How Cryptocurrency Becomes Linked to Drug Trafficking Bitcoin and other virtual assets have become increasingly exploited as a means of transferring drug transaction payments, primarily due to their perceived anonymity and the ability to send funds across borders instantly. A common structure involves a drug buyer depositing cash into an OTC channel, which then purchases Bitcoin and transfers it to a wallet address specified by the seller. Korean law enforcement has responded by establishing dedicated cryptocurrency investigation units to pursue these cases. In a recent large-scale operation, the Gyeonggi Southern Police Agency investigated a drug network operating through Bitcoin and Telegram over approximately one year, arresting 122 individuals and detaining 47 of them pending prosecution. 2. Applicable Laws and Penalties In cases where drug-related funds are traced through a cryptocurrency OTC operation, investigators do not limit their approach to a single charge. Multiple laws are applied concurrently as a combined offense. 1) Aiding and Abetting under the Narcotics Control Act (Criminal Act, Article 32) Even without directly purchasing, selling, or distributing narcotics, a person who facilitates the transfer of drug transaction payments via Bitcoin may be prosecuted as an accomplice. Korean police have confirmed that individuals who assist in drug distribution through online virtual asset transactions — without ever meeting the drug dealer — can be charged with aiding and abetting under the Narcotics Control Act. Under Article 58(1) of the Narcotics Control Act, the principal offender in a drug sale faces life imprisonment or a minimum of five years in prison. An accomplice, after the statutory reduction of one-half under Article 32(2) of the Criminal Act, may still face a minimum of two years and six months of imprisonment. This is not a minor charge. 2) Act on Reporting and Using Specified Financial Transaction Information (ARUSFTI) Violation Operating an unlicensed virtual asset exchange service for profit — without registering with the Financial Intelligence Unit (FIU) — constitutes a violation of Article 7(1) of the ARUSFTI, punishable under Article 17(1) by up to five years in prison or a fine of up to KRW 50 million. The key factor is "business continuity." Unlike a one-time transaction between acquaintances, repeated exchanges conducted for profit establish the commercial nature of the activity, making criminal prosecution far more straightforward for investigators. 3) Act on Regulation and Punishment of Criminal Proceeds Concealment (ARPCPC), Article 3 If a person transfers or converts funds while being aware — even vaguely — that those funds derive from illegal activity, this constitutes concealment or disguising of criminal proceeds. It is not necessary to know the specific nature of the crime. The penalty is up to five years in prison or a fine of up to KRW 30 million. 3. The Central Legal Issue: How Authorities Establish Criminal Intent The most common defense in cryptocurrency OTC cases is: "I had no idea the funds were related to drugs." However, Korean courts have consistently held that full knowledge of the specific crime is not required. "Such recognition is sufficient if the person was aware that the relevant property constitutes criminal proceeds as defined under the law — it is not necessary to know the specific type of crime or its concrete details." — Supreme Court of Korea, January 11, 2007, Decision 2006Do5288 In actual drug-related cryptocurrency cases, prosecutors and police have framed criminal intent in charging documents as follows: the suspect "transferred Bitcoin after recognizing and anticipating that the payment constituted the proceeds of narcotics transactions." This framing — recognition and anticipation — is how investigators establish what Korean law calls dolus eventualis (indirect intent, or awareness of probable consequences). The external circumstances investigators use to infer this intent include: Informal transaction structure: Conducting transactions through Telegram rather than a licensed exchange, receiving funds via anonymous bank deposits Abnormally high commission rates: Charging 10–16% per transaction, far exceeding standard exchange fees. Investigators treat this as compensation for the legal risk — effectively a premium for facilitating illegal activity No customer verification (KYC): Failing to confirm the identity, purpose, or source of funds from any counterparty Concentration of transfers to a single wallet: The majority of Bitcoin transfers flowing consistently to the same wallet address, later identified as belonging to a drug seller Continued operation after prior investigation: Resuming OTC operations after having already been investigated for a related matter When these factors are present in combination, investigators build the case that the suspect could not reasonably have been unaware of the illegal nature of the transactions. 4. How Korean Authorities Track Cryptocurrency Transactions The assumption that cryptocurrency transactions are untraceable is no longer accurate. Korean law enforcement employs sophisticated methods to follow the money. ▪️Blockchain Forensics and On-Chain Data Analysis Every Bitcoin transaction — its timestamp, wallet address, and amount — is permanently recorded on the blockchain and cannot be deleted. Once a drug seller's wallet address is identified, all wallet addresses that transferred Bitcoin to that address are immediately traceable, including OTC operators and their associated bank accounts. ▪️Exchange Warrants and Account Seizure Domestic cryptocurrency exchanges are required by law to provide account information, transaction records, and identity verification data upon receipt of a warrant. A single transaction routed through a Korean exchange is sufficient for investigators to identify a person. The Supreme Court of Korea ruled in December 2025 that seizure of Bitcoin held in exchange-linked wallets is lawful, further expanding the investigative reach of authorities in cryptocurrency-related cases. 5. Key Legal Considerations If You Have Been Contacted by Authorities ▪️Clarify the Scope of the Charges Early Aiding and abetting under the Narcotics Control Act, violations of the ARUSFTI, and violations of the ARPCPC each have different legal elements. Understanding which charges are actually in play — and designing a response strategy for each — should happen at the earliest possible stage. ▪️Objective Demonstration That Criminal Intent Was Absent Saying "I didn't know" is not a legal defense in itself. What is required is an objective and documented account of why the transactions could reasonably have appeared legitimate — including any deception by the counterparty regarding their identity or the purpose of the funds. Relevant materials may include messaging records, transaction logs, and contemporaneous communications. ▪️The First Police Interview Is Critical By the time investigators issue a summons, they have typically already obtained blockchain analysis results and financial records. Statements made in the first interview that are inconsistent with documentary evidence can be used to confirm the existence of criminal intent. It is strongly advisable to consult a legal professional and establish a clear statement strategy before attending any police interview. DECENT Law Firm — Virtual Asset Practice Group Cases involving Bitcoin and drug transactions in Korea sit at the intersection of criminal law, the Narcotics Control Act, financial regulation, and blockchain forensics. Each charge carries distinct legal elements and requires a tailored defense strategy. DECENT Law Firm's Virtual Asset Practice Group has hands-on experience handling virtual asset-related narcotics investigations from the initial investigation stage through to trial. If you have been contacted by Korean law enforcement or are uncertain about the scope of the allegations against you, we recommend seeking legal advice before your first interview. This article is intended for general informational purposes only and does not constitute legal advice for any specific case or individual situation.
2026-05-20 Naver Blog -
Blogs
Involved in a USDT Exchange Transaction in Korea?
Legal Risks of Crypto OTC Transactions, Money Laundering Allegations, and Accomplice Liability Some individuals become involved in USDT (Tether) exchange transactions in Korea believing they are simply helping with a private crypto transfer or OTC deal, only to later find themselves under investigation for fraud, money laundering, or violations of Korean financial regulations. In recent years, Korean investigative authorities have increasingly focused on crypto-based money laundering structures connected to voice phishing, investment scams, illegal gambling operations, and overseas criminal organizations. As a result, even participants who were not part of the original scam may become subject to criminal investigation if they are found to have handled, converted, or transferred suspicious funds. This article explains the key Korean laws, court precedents, and investigative standards commonly applied in USDT exchange cases involving alleged accomplice liability or concealment of criminal proceeds. Why USDT Is Frequently Used in Money Laundering Schemes USDT (Tether) is a stablecoin pegged to the U.S. dollar and is widely used because of its relatively stable value and fast cross-border transfer capability. However, these same characteristics also make USDT attractive to criminal organizations seeking to move or conceal illegally obtained funds. In Korea, investigative authorities have recently uncovered multiple cases where proceeds from voice phishing or investment fraud were converted into USDT and transferred to overseas wallets or cash-out channels. In March 2026, for example, Seoul Jungnang Police announced the arrest of 19 individuals involved in laundering fraud proceeds through USDT conversion schemes linked to overseas criminal groups, with approximately KRW 6 billion in criminal assets seized. Under Korea’s Act on Reporting and Use of Certain Financial Transaction Information (commonly referred to as the “Special Financial Transactions Act” or “Special Act”), anti-money laundering obligations primarily apply to registered Virtual Asset Service Providers (VASPs). As a result, OTC crypto transactions conducted privately between individuals often become a gray area where the participant’s knowledge and intent become the central legal issue. Major Korean Laws That May Apply 1) Fraud Accomplice Liability Under the Korean Criminal Act If a person is found to have participated in the movement, exchange, or delivery of funds obtained through fraud, Korean prosecutors may investigate whether that person acted as: a joint principal offender (co-principal), or an aider and abettor (accessory) under Articles 30 and 32 of the Korean Criminal Act. The key issue is whether the participant knowingly assisted the fraudulent scheme or merely engaged in what appeared to be an ordinary transaction. 2) Act on Regulation and Punishment of Criminal Proceeds Concealment One of the most commonly applied statutes in these cases is Korea’s Act on Regulation and Punishment of Criminal Proceeds Concealment. The law criminalizes conduct such as: disguising the acquisition or disposition of criminal proceeds, concealing the origin of criminal proceeds, or hiding or transferring criminal assets. In practice, converting fraud proceeds into cryptocurrency, cashing out USDT, or transferring funds through third-party wallets may all be viewed by investigators as potential money laundering activity. The central legal question is usually whether the person handling the transaction knew — or at least should have suspected — that the funds were connected to criminal activity. 3) Korean Special Financial Transactions Act (Crypto Business Registration Issues) Individuals who repeatedly exchange USDT or conduct OTC crypto transactions for commission-based profit may also face allegations of operating an unregistered virtual asset business. Korean authorities generally look at factors such as: repeated or continuous transactions, receipt of commissions or service fees, dealing with multiple counterparties, and operation resembling a commercial exchange service. A one-time transaction between acquaintances is treated differently from ongoing exchange activity conducted for profit. 4) Foreign Exchange Transactions Act In some cases, Korea’s Foreign Exchange Transactions Act may also become relevant. This typically arises where funds are transferred internationally, including situations involving overseas wallets, offshore entities, or cross-border settlement structures. If the transaction occurred solely between domestic parties using Korean won, investigators may focus more heavily on money laundering or crypto regulatory issues rather than foreign exchange violations. However, international transfer structures may trigger additional scrutiny. The Most Important Legal Issue: “Willful Blindness” or Implied Criminal Intent One of the most important legal concepts in these investigations is whether the participant had criminal intent — including so-called “willful blindness” or implied awareness. The Korean Supreme Court has ruled as follows: To punish a person for concealing criminal proceeds, it is sufficient that the person recognized the property as criminal proceeds in general terms; it is not necessary for the person to know the exact type or details of the underlying crime. — Korean Supreme Court Decision 2006Do5288, Jan. 11, 2007 This means that even if someone claims: “I did not know it was voice phishing money,” or “I thought it was related to tax avoidance or gambling,” criminal liability may still arise if the person recognized that the funds were likely illegal in some form. Importantly, Korean courts may separately recognize liability for concealing criminal proceeds even where accomplice liability for the original fraud itself is disputed. The two offenses are legally distinct. Factors Korean Investigators Commonly Use to Infer Criminal Awareness Investigative authorities do not rely solely on direct admissions. Instead, they often infer intent based on the overall transaction structure. Common factors include: ▪️Unofficial OTC Transaction Methods Transactions conducted outside registered exchanges or through private channels are often viewed as higher-risk structures. ▪️Repeated Transactions Repeated dealings using similar methods may be interpreted as evidence that the participant understood the suspicious nature of the activity. This may also support allegations of operating an unregistered crypto business. ▪️Excessive Commissions or Fees Receiving unusually high compensation compared to ordinary exchange fees may be treated as evidence of awareness of illegal risk. ▪️Lack of Identity Verification Transactions involving anonymous parties, unverifiable identities, or disappearing counterparties may raise additional suspicion. ▪️Blockchain Transaction Analysis Because cryptocurrency transfers are recorded on the blockchain, Korean authorities increasingly use blockchain forensic analysis to trace fund flows and identify links between victim funds and crypto wallets. Where several of these factors appear together, prosecutors may argue that the participant at least “implicitly recognized” the illegal nature of the funds. Defense Strategy: Explaining Why Criminal Awareness Did Not Exist In these cases, simply stating “I did not know” is rarely enough. Because Korean courts broadly recognize implied criminal intent, the defense must often demonstrate — through objective facts and evidence — why the person could not reasonably have recognized the funds as criminal proceeds. Important factors may include: how the relationship with the counterparty developed, why the transaction appeared legitimate at the time, whether there were objective warning signs, how the transaction was explained to the participant, and whether statements remain consistent with blockchain records and messaging history. Early-stage responses are particularly important because investigators often already possess substantial transaction data before conducting interviews. An inconsistent or poorly prepared initial statement may later be used to strengthen suspicions. In addition, allegations involving fraud accomplice liability, criminal proceeds concealment, crypto business registration issues, and foreign exchange violations each involve different legal elements. Identifying the actual scope of potential liability at an early stage is therefore critical. Decent Law Firm | Digital Asset & Crypto Investigation Team USDT-related investigations in Korea often involve complex issues extending beyond ordinary crypto transactions, including blockchain tracing analysis, accomplice liability, money laundering regulations, crypto compliance obligations, and foreign exchange law. At Decent Law Firm, our digital asset and crypto investigation team has experience handling cryptocurrency-related investigations from the initial investigation stage through criminal trial proceedings. If you have been contacted by Korean investigative authorities or are unsure about the allegations being raised, careful early-stage legal review is strongly recommended. This article is provided for general informational purposes only and does not constitute legal advice for any specific case.
2026-05-19 Naver Blog -
Blogs
Toxic Clauses in Investment Agreements: Key Red Flags Startup Founders Must Check
The outcome of an investment deal is often determined by the information gap between a founder reviewing their first investment agreement and an investor who has negotiated dozens of them before. Common Investment Documents: SPA, SHA, and Term Sheet When startups raise investment, they usually encounter three core legal documents. ▪️Share Purchase Agreement (SPA) The SPA is the primary agreement governing the investor’s acquisition of newly issued shares. It typically covers investment amount, valuation, closing conditions, representations and warranties, and other key transaction terms. ▪️Shareholders’ Agreement (SHA) The SHA regulates the relationship among shareholders after the investment closes. This document often contains the provisions that most directly affect a founder’s control over the company and future exit strategy, including voting rights, board control, transfer restrictions, drag-along rights, and veto rights. ▪️Term Sheet The term sheet summarizes the core investment terms before the definitive agreements are signed. Although parts of a term sheet may be non-binding, it often becomes the framework for the final contracts. In practice, negotiating leverage decreases significantly once the term sheet is signed. Four Toxic Clauses Founders Frequently Overlook ▪️Liquidation Preference Liquidation preference gives investors the right to recover their investment — sometimes more than their original investment — before founders receive any proceeds in an acquisition, merger, or liquidation event. The economic impact depends heavily on: The multiple (1x, 2x, etc.) Whether the preference is participating or non-participating In some cases, founders may receive little to no proceeds even after a successful exit if the liquidation structure heavily favors investors. ▪️Anti-Dilution Protection Anti-dilution clauses protect investors if future financing rounds occur at a lower valuation. The most aggressive version is the “Full Ratchet” mechanism, which can severely dilute founder ownership. More balanced structures typically use a “Weighted Average” adjustment method instead. Founders should carefully review: Trigger conditions Calculation formula Scope of protected securities ▪️Drag-Along Rights Drag-along provisions allow majority shareholders or investors to force minority shareholders to sell their shares under the same terms during a company sale. Without carefully drafted protections, founders may be forced into an exit they do not support. Key issues to negotiate include: Minimum approval thresholds Minimum sale price Founder consent rights Protection against unfavorable deal structures ▪️Reserved Matters and Investor Veto Rights Reserved matters clauses require investor approval for certain company decisions. While some level of oversight is standard, overly broad veto rights can significantly restrict day-to-day management and strategic flexibility. These provisions sometimes extend beyond major corporate actions and into operational matters such as: Hiring decisions Annual budgets Business expansion New product launches Overly expansive veto rights can effectively undermine founder control. Founder Protection Clauses That Should Not Be Missing Reviewing toxic clauses is only part of the process. Equally important is ensuring that the agreement includes provisions protecting the founder’s long-term position. ▪️Tag-Along Rights Tag-along rights allow founders or minority shareholders to participate in a share sale initiated by major investors or controlling shareholders under the same terms and conditions. This prevents founders from being left behind in a partial exit transaction. ▪️Reasonable Non-Compete Restrictions Non-compete clauses are common, particularly when investors are concerned about founder departures. However, the scope must remain reasonable in: Duration Geographic coverage Industry definition Overly broad restrictions can make it difficult for founders to launch future ventures or continue working in their own field. ▪️Flexible Use of Investment Funds Some investment agreements impose rigid limitations on how capital can be spent. Excessively narrow restrictions may prevent startups from pivoting or adapting to market conditions. Maintaining flexibility in operational spending categories is often critical for early-stage companies. Why Startup Founders Should Involve a Lawyer Early Investment agreement review is not simply about proofreading a contract. A startup investment lawyer should help with: Identifying and negotiating toxic clauses Structuring founder protection provisions Anticipating future fundraising and exit scenarios Preparing negotiation strategies against investor revisions Balancing governance and operational flexibility Most importantly, legal review should begin at the Term Sheet stage. Once a founder signs a term sheet, investors often treat the agreed terms as commercially settled, making it far more difficult to renegotiate key provisions later in the process. In many startup investments, the best time to negotiate is before signing anything — not after.
2026-05-15 Naver Blog
