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Articles HOTReasons for Rejection of Haru Invest and Delio Rehabilitation Cases
Background of the Haru Invest and Delio Cases A year ago, during the major downturn in the cryptocurrency market, the Haru Invest and Delio scandals unfolded, leaving significant impacts on investors. While the market has since evolved, with Bitcoin and Ethereum entering mainstream finance through spot ETFs, these cases remain relevant in the legal landscape, particularly concerning rehabilitation and bankruptcy proceedings. Why Rehabilitation Was Denied Rehabilitation and bankruptcy cases receive less public attention compared to criminal trials. However, these processes are crucial for victims seeking to recover their losses. While criminal cases focus on punishing wrongdoing, rehabilitation and bankruptcy proceedings determine how the debtor's remaining assets can be distributed to creditors. Recently, the Seoul Bankruptcy Court rejected the rehabilitation applications for both Haru Invest and Delio, citing three key reasons, primarily aligned with Delio's case: Imminent Implementation of the Virtual Asset User Protection Act (Effective July 19, 2024): The Act mandates the separation of company and investor assets, a requirement Delio cannot meet due to the nature of its business. The court ruled that Delio’s inability to comply with this law renders its business operations infeasible post-rehabilitation. With only two current employees, Delio also lacks the capacity to pursue new ventures. Uncertainty of Business Success: Court-appointed investigators reported that Delio's prospects for success in either its existing or new business endeavors were highly uncertain. The company's structure incurs monthly expenses exceeding KRW 30 million, making continued operations unsustainable. Prolonged Asset Recovery Timeline: The court noted that rehabilitating Delio would result in dwindling resources due to ongoing operational costs, leaving less for creditors. Conversely, immediate bankruptcy would facilitate quicker distribution of assets to creditors, aligning with their best interests. Bankruptcy Proceedings and Asset Realization In corporate bankruptcy, when liabilities outweigh assets, a trustee is appointed to manage asset liquidation and creditor claims. This ensures fair distribution of the remaining resources before the company is dissolved. Key factors in these cases include how effectively trustees can recover assets, particularly cryptocurrency, which can be easily concealed through wallet transfers. Successful recovery often requires close collaboration with criminal investigations to track and seize concealed or misappropriated assets. Connection to Haru Invest and FTX During Haru Invest's criminal trial, prosecutors revealed that a significant portion of the lost assets was managed by B&S Holdings, which claims to have creditor claims against the bankrupt FTX exchange. This layered recovery process underscores the complexity and potential delays in compensating victims. Recommendations for Investors Investors in Haru Invest and Delio should monitor both the criminal proceedings at the Seoul Southern District Court and the bankruptcy cases at the Seoul Bankruptcy Court. Both avenues are critical in determining the ultimate recovery of their losses.
2024-07-06 블록미디어 -
Articles
Four Changes When the Virtual Asset User Protection Act Takes Effect on July 19
Starting from July 19, 2024, the Act on the Protection of Virtual Asset Users and Other Matters (Virtual Asset User Protection Act) will come into effect. The Virtual Asset User Protection Act aims to protect the rights and interests of virtual asset users and establish a transparent and sound trading order in the virtual asset market by determining matters related to the protection of user assets and the regulation of unfair trading practices. So, what will change with the implementation of the Virtual Asset User Protection Act? You can find out through an article by Jin Hyeonsu, the Managing Partner of Decent Law Firm.
2024-06-06 Premium Contents -
Articles
The Manipulation of Cryptocurrency Markets and Market Makers
Prohibition and Limited Permission of Market Manipulation In South Korea, the Capital Markets Act prohibits market manipulation. In stock markets, thinly traded stocks with wide bid-ask spreads are vulnerable to sharp price fluctuations with minimal trades. To counteract this, market makers stabilize prices by narrowing bid-ask spreads and preventing extreme volatility. What is a Market Maker? Market makers are entities permitted to manipulate trading volumes legitimately to stabilize stock prices. The Capital Markets Act allows their interventions to fulfill this objective. Thanks to this system, stable stock prices are maintained except during unusually large-scale trades. Market Makers in Cryptocurrency Exchanges Cryptocurrency markets also have market makers. Initial listing prices of tokens are set by exchanges, and subsequent prices are determined through user trading. Early post-listing stages often see significant bid-ask gaps, causing sharp price swings. Market makers intervene to address this volatility. Unlike stock markets, the crypto industry lacks legal regulations for market makers. Crypto exchanges often charge listing fees that include market-making costs to artificially create liquidity and stabilize new token prices. However, South Korean prosecutors view such practices as manipulative. Cases Related to Market Making in Crypto Exchanges The Upbit Case The "Upbit wash trading allegation" is a notable case that highlights the legal stance on market making in crypto exchanges. Prosecutors indicted Upbit representatives in 2018 for market manipulation. Lower courts acquitted them, emphasizing the absence of specific regulations on liquidity provision. However, in appellate courts, procedural issues invalidated crucial evidence, leaving detailed judicial examination of market making unaddressed. The Coinone Listing Scandal The Coinone listing scandal involved brokers bribing Coinone to list certain cryptocurrencies. They inflated trading volumes and prices to lure investors before offloading at peak prices. The court identified these activities as manipulative rather than legitimate market making, leading to convictions. Future Regulation: The Virtual Asset User Protection Act The recently passed Virtual Asset User Protection Act, set to take effect on July 19, 2024, introduces penalties for market manipulation under Article 10. Similar to stock market mechanisms, crypto markets may also benefit from regulated market makers to stabilize prices. However, clear standards for who qualifies as a market maker, and how they should operate, remain undefined. Conclusion While the crypto market currently operates in a legal grey area regarding market making, the new law is an opportunity to establish robust legal frameworks. Addressing market manipulation under the guise of market making can enhance market stability and investor trust.
2023-12-01 Coin Desk Korea -
Articles
Why You Shouldn't Give Up on Unrecoverable Receivables
Unrecoverable receivables often arise when a debtor lacks the financial means to settle their debts. In such cases, businesses may choose not to initiate legal proceedings, considering the debtor's insolvency. However, overlooking such receivables without evaluating civil, criminal, and tax implications may not always be the best course of action. Approaches to Handling Receivables Receivables management includes methods such as email reminders, certified letters, and formal demand notices, followed by debt collection procedures and legal actions. Typically, corporate disputes involve: Assessing the debtor’s financial status through a credit bureau. Initiating asset and receivables attachments. Filing a civil lawsuit. However, given the time and costs involved, businesses may decide against litigation or pursue settlements when the debtor is insolvent. That said, proper consideration of civil, tax, and criminal implications is essential in choosing the right course of action. Civil Implications Statute of Limitations: The statute of limitations for most business receivables is five years. Filing a lawsuit interrupts the statute of limitations, making it possible to enforce claims later if the debtor regains financial stability. If no legal action is taken within five years, the debtor can invoke the statute of limitations, rendering the receivables irrecoverable. Tax Implications Corporate Tax Deductions: The Corporate Tax Act allows businesses to deduct the value of bad debts if the debts meet specified conditions. However, the National Tax Service requires companies to provide evidence that they pursued all necessary legal actions, such as filing lawsuits, to recover receivables. Without such actions, even objectively unrecoverable receivables may not be deductible for corporate tax purposes. In short, to claim tax deductions for bad debts, businesses must provide objective evidence that all feasible recovery efforts were made. Criminal Implications Potential for Breach of Fiduciary Duty: If a business opportunity exists to recover a receivable, but the company’s representative deliberately refrains from filing a lawsuit, claiming insolvency or personal judgment, they could be held liable for breach of fiduciary duty. This could lead to legal consequences for failing to act in the company’s best interest. Recommendations To mitigate risks, it is essential to: Assess the debtor's financial situation: Investigate the debtor’s financial capacity and assets. Evaluate recovery costs and potential outcomes: Balance recovery costs against the likelihood of successful collection. Consider legal actions for statute of limitations and tax purposes: Ensure appropriate legal measures are taken to suspend the statute of limitations and substantiate tax claims. Factor in criminal liability risks: Avoid situations where negligence could be construed as breach of fiduciary duty. Even if receivables seem unrecoverable, pursuing legal and procedural steps can safeguard your business from further liabilities and help optimize financial outcomes.
2023-11-07 와우테일(WOWTALE) -
Articles
Why Prompt Action Is Necessary When a Client Delays Payment for Goods
Causes of Payment Delays Payment disputes often arise when a client fails to pay for goods delivered as promised. A common reason for such delays is financial difficulty within the client’s company, potentially caused by poor economic conditions, failure to secure investments, or mismanagement of funds. Even in cases of financial distress, clients may still possess valuable assets, such as office deposits, machinery, or receivables from other companies. Therefore, when payment is delayed, it is essential to investigate what assets the client retains and identify their primary banking relationships. Legal Risks and the Statute of Limitations Payment claims for goods or services constitute a form of receivables, which are subject to a legal statute of limitations. If no legal action is taken within this period, the right to claim these receivables expires. Thus, it is crucial to initiate civil litigation to recover unpaid debts before the statute of limitations lapses. Overcoming Hesitations to Take Legal Action Businesses often hesitate to sue long-standing clients due to established trust or concerns about damaging future relationships. However, waiting indefinitely will not resolve the financial issue and may result in the expiration of your legal rights, leaving you unable to recover the debt. Statutory Limitations Under Civil Law According to Article 163 of the Civil Code, certain claims are subject to a three-year statute of limitations: Claims for monetary or property payments with a term of one year or less (e.g., interest, rents). Claims related to medical treatment, nursing, or pharmaceutical services. Claims for construction design or supervision by contractors and engineers. Claims for the return of documents held by legal or financial professionals. Claims related to professional services provided by lawyers, accountants, or similar experts. Claims for the price of goods or products sold by merchants or producers. Implications for Payment Claims The price of goods sold by merchants is subject to the three-year limitation period under Article 163(6) of the Civil Code. After three years from the date the debt arises, the right to claim payment is forfeited if no legal action is taken. While business claims under the Commercial Act are subject to a five-year limitation, the shorter period specified in the Civil Code takes precedence if applicable. Conclusion: The Need for Swift Action When a client delays payment, swift legal action is essential to protect your rights and recover outstanding debts. Delays can lead to the loss of your legal claim, especially in cases subject to shorter statutory limitations. Immediate steps, such as filing a lawsuit or initiating debt recovery procedures, ensure that your rights remain intact and prevent financial losses.
2023-10-05 와우테일(WOWTALE) -
Articles
How Investors Should Respond to the Haru Invest and Delio Incidents
In June 2023, Haru Invest and Delio, two prominent virtual asset management service providers, suspended deposit and withdrawal operations following alleged financial mishandlings. These events raise significant concerns for investors, and proactive measures are necessary to safeguard their interests. Background of the Incidents Haru Invest: Operated by pooling customer assets into funds managed externally. It attributed its collapse to fraudulent reporting by B&S Holdings, one of its external fund managers. Delio: Similar operational model, potentially linked to Haru Invest through shared fund management practices. This connection suggests possible interrelated failures between the two companies. These issues have placed both companies in legal jeopardy, with the potential for criminal and civil lawsuits, including allegations of fraud, embezzlement, and breaches of contract. Key Investor Actions 1. Document and Preserve Transaction Records Why: In the event of legal proceedings, proof of claims is crucial. How: Capture screenshots of all transaction history, account details, and balances from Haru Invest and associated platforms. Secure this data against potential hacking or account deletion. 2. Consider Civil and Criminal Actions Criminal Complaints: Investors can collectively file complaints for fraud or mismanagement. Civil Lawsuits: Pursue claims for damages or asset recovery. Be aware that, as non-financial institutions, Haru Invest and Delio are unlikely to benefit from state interventions. 3. Seek Preservation Orders Rationale: Virtual assets can be easily hidden or transferred, necessitating swift action to secure remaining funds. Steps: Petition the court for seizure or freezing orders against virtual assets held at domestic or international exchanges linked to the companies. 4. Monitor Developments and Collaborate Stay Informed: Track updates in both criminal and insolvency proceedings. Collaborate: Work with experts or align with other affected investors to share resources and enhance leverage. 5. Consider Liquidating Other Assets Why: The interconnected nature of financial mishandlings could cause broader ripple effects in the virtual asset market. Action: Minimize exposure by converting holdings into fiat currency, especially in centralized exchanges, until regulatory and market stability improves. Broader Implications and Legal Recourse Both Haru Invest and Delio are likely to face bankruptcy or restructuring procedures. Investors should: Engage in Bankruptcy Proceedings: File claims to participate in the asset distribution process. Monitor Prosecutorial Actions: Collaboration between bankruptcy trustees and criminal investigators is crucial for asset recovery.
2023-06-16 블록미디어(BLOCKMEDIA)