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Media CoverageHundreds of Billions in Multi-level NFT Fraud Allegations Involving Coupang and Naver
A group of individuals who attracted investors by promising to operate a "profit-guaranteed shopping mall" that would resell products sourced from popular overseas online stores on domestic platforms like Naver and Coupang, but failed to pay the promised returns, is now under police investigation. It was revealed that, contrary to their promises, they brought in counterfeit goods, misused investors' personal information, and even issued Non-Fungible Tokens (NFTs) under the guise of innovative e-commerce to attract investment funds. (omitted) Pureun “Ian” Hong, Managing partner at Decent Law Firm, the legal representative for the victims, argued that their methods amounted to a pyramid scheme and a Ponzi scheme. Attorney Hong stated, "They shifted the responsibility of recruitment onto the investors by offering them incentives for bringing in new investors." He added, "With limited actual profit generation, it appears they were using funds from newly recruited investors to pay returns to earlier investors under the guise of profits." He further emphasized, "If an investment offers unusually high returns or unfamiliar methods of receiving funds, it’s important to be suspicious and to consider the risks of acting as a nominee before investing."
2023-12-01 Seoul Economy -
Media Coverage
Whales, the Major Players in the Coin Market, Hold 90% of Coins on Upbit
In Upbit, a domestic Korean Won-based virtual asset exchange, it has been found that in 9 out of 10 virtual assets traded, large investors (whales) hold more assets than small investors. This suggests that the circulated virtual assets are concentrated in the hands of issuers or a few intermediary businesses. Experts point out that in a coin market skewed towards whales, it is difficult to form healthy price levels, and the risk of a sharp price crash following large-scale sell-offs looms. (omitted) Pureun “Ian” Hong, Managing partner at Decent Law Firm, pointed out, "The market price is controlled by the decisions of a few whales. When whales sell large amounts of coins, the market is flooded with more than individual investors can absorb, leading to an inevitable drop in prices." The Wemix crash is a prime example of small investors being caught in the moves of whales. In late 2021, Wemade, the company behind Wemix, made a large-scale sale without prior notice, earning about 200 billion KRW. The price of Wemix subsequently plummeted by around 70%. Wemix investors then accused Wemade of misleading them about the circulation volume and filed a complaint against CEO Jang Hyun-guk, with the Seoul Southern District Prosecutors’ Office currently investigating whether Jang violated any laws. The fact that virtual assets operate in a regulatory blind spot further reduces the investment security of small investors. In securities markets, it is possible for a small number of individuals to hold a significant portion of shares. However, securities are subject to regulations such as disclosure requirements and insider trading prohibitions, which provide investor protection. In contrast, there are no such regulations in place for virtual assets. Attorney Hong said, "While there is some legal ambiguity around coins, they are not currently subject to regulations under the Capital Markets Act or the Commercial Act. As a result, measures to protect investors are extremely limited."
2023-11-21 biz.chosun -
Media Coverage
'KOK Token' Investment Fraud Controversy, Reports of Damages Filed with Authorities in Korea, the U.S., and the U.K.
Reports of damages have been filed with overseas financial authorities regarding KOK Token, an operator that attracted investment funds by promising up to 20% rewards based on contributions for introducing investments to others after depositing virtual assets. Domestic police have also received complaints against the company and have begun an investigation. The number of known victims is estimated to be 900,000, with the total damages approaching 4 trillion KRW. Investor groups have submitted a joint statement with over 1,500 signatures to the police and have filed petitions with the National Assembly as part of their collective action. (omitted) The investor group recently submitted a joint statement with 1,582 signatures to the police and filed a petition with the National Assembly, signaling the start of collective action. A representative of the investor group stated, "We plan to gather more victims, draft a collective petition, and submit it to the police." Experts warn that businesses that encourage investment referrals while guaranteeing high returns are likely to be illegal pyramid schemes, so caution is necessary. Pureun “Ian” Hong, Managing partner at Decent Law Firm, explained, “It is crucial to understand the issuance and circulation of virtual assets. If the issuer holds a large amount of the virtual asset and can sell it at any time, general investors may suffer significant losses due to a sharp price drop.”
2023-11-03 biz.chosun -
Media Coverage
The Determination of Whether Cryptocurrencies Qualify as Securities Has Just Begun
A court ruling has been made that effectively does not recognize the securities nature of 'Ripple (XRP),' which ranks 4th in the total market capitalization of cryptocurrencies. However, as the court determined that Ripple sold directly to institutional investors has the characteristics of a security, the virtual asset market is entering another phase. The virtual asset industry warns that since the court accepted some of the U.S. Securities and Exchange Commission’s (SEC) claims, further disputes over the securities nature of other assets may arise. (omitted) Legal experts suggest that aside from the summary judgment, this lawsuit could turn into a long-term battle. Additionally, as investments from institutions are now considered securities, various negative outcomes may occur, such as virtual asset projects struggling to find investors. (omitted) Pureun “Ian” Hong, managing partner at Decent Law Firm, said, “Most virtual asset projects have grown by receiving initial investments from institutions. However, with this ruling, such actions may now be considered investment contracts, which could make it more difficult for many virtual asset projects to attract funding in the future.”
2023-07-17 biz.chosun -
Media Coverage
Rehabilitation or Bankruptcy?' Haru Invest and Delio Investors are Divided in Opinion
Investors are divided over how to recover funds from virtual asset financial services Haru Invest and Delio, which suspended withdrawals due to uncertainty. One side supports the rehabilitation process, while the other favors bankruptcy procedures. Rehabilitation takes time but ensures that at least a portion of the funds can be recovered. Bankruptcy allows for a quicker recovery process, but it carries relatively greater uncertainty. (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, said, "Both Haru Invest and Delio have lost the trust of investors and seem unable to continue operations. It seems more suitable for investor relief to proceed with corporate bankruptcy, distributing debts in the short term rather than following a rehabilitation plan that could take a long time to pay back investors. However, if there is a possibility of rehabilitation, that would not be a bad option either."
2023-07-12 Digital Today -
Media Coverage
What is a coin referral?
Host: Han Chi-ho / Director of NBNTV Investment and Economic Research Guest: Pureun “Ian” Hong / managing partner at Decent Law Firm Q. First, shall we take a look at what a coin referral is? Referral marketing is a system where a third party introduces customers. When the third party signs up for the exchange, the referral code owner receives cryptocurrency rewards. New exchanges create codes for famous internet broadcasters for promotional purposes. By entering a "referral code," users receive transaction fee discounts. Q. What are the issues with coin referral marketing? It is used in cryptocurrency investment internet broadcasts, raising concerns about encouraging high-risk investments to viewers. Some exchanges pay a portion of viewer losses to the broadcasters. Q. Is there criminal liability in coin referral marketing? The conditions for establishing fraud (under Article 347 of the Criminal Act) are "deception" and "obtaining property or financial benefits." The key issue is whether the "deception" element is met. Referral marketing is recognized as a deceptive act if there is false or exaggerated advertising. “If the risks of the exchange are concealed during promotion, it constitutes fraud.” Under criminal fraud law, any referrer with Korean nationality is subject to domestic law punishment. “It is difficult to prove the intentional fraud in referral cases.” Q. Can victims of coin referral marketing file civil lawsuits? Civil lawsuits related to referral marketing aim for “compensation for damages due to illegal acts.” Article 750 of the Civil Act states that a person who causes damage to another due to an unlawful act, either intentionally or negligently, is responsible for compensating that damage. The key in civil lawsuits is proving "intent or negligence." If referral marketing is conducted after recognizing internal issues of the exchange, winning a civil lawsuit is possible. Caution is needed regarding illegal referral practices.
2023-07-12 NBN NEWS -
Media Coverage
The Crisis of Haru Invest and Ponzi Scheme
Host: Reporter Jang Se-jin Guest: Pureun “Ian” Hong, managing partner at Decent Law Firm Q. What is the Haru Invest incident? Haru Invest operated a virtual asset deposit service. Subtitle: The suspension of virtual asset deposits by Haru Invest is spreading. Subtitle: Haru Invest is in a state of over-indebtedness or insolvency. Q. It’s been two weeks since Haru Invest suspended withdrawals… what is the current situation? Delio and Haru Invest have been suspending withdrawals for two weeks… a notice regarding issue resolution has been posted. Haru Invest stated, “We will take legal action against B&S Holdings for fraud and embezzlement.” Q. Why can’t Haru Invest come up with a solution? Haru Invest is in a state of over-indebtedness or insolvency. Q. Is Haru Invest’s “exit scam” controversy fraudulent? Financial authorities stated, “Haru Invest is not under supervision… it should be viewed as a fraud case.” They blocked deposits and withdrawals, closed their office, and disappeared. Haru Invest was not registered as a virtual asset service provider. Q. Why is Haru Invest’s “exit scam” being considered a fraud case? Despite being over-indebted or insolvent, Haru Invest continued to raise funds from investors. Haru Invest investors are initiating a class action lawsuit. Q. What is the direction of the investigation into Haru Invest, an overseas corporation? There are suspicions that Haru Invest established an overseas corporation to evade regulation following the “withdrawal suspension.” The prosecution has imposed travel bans on key suspects related to B&S, Haru, and Delio. Q. What is the current situation with Haru Invest executives’ travel bans? Haru Invest Korea executives and many members of Korean companies such as BlockCrafters are listed as directors. Testimony from Haru Invest staff and others is necessary. Q. What is the direction of the investigation into the Haru Invest incident? Testimonies from Haru Invest staff are essential to confirm the details. Objective evidence related to Haru Invest must be collected before summoning executives. Q. What is the current situation of the damages suffered by Haru Invest investors? Haru Invest blocked withdrawals and communication; within three days, users reported damages amounting to 100 billion KRW. About 1,000 more people are waiting to report damages… the scale of damage is expected to grow. Q. What are the solutions for Haru Invest investor victims? Civil lawsuits and criminal complaints related to Haru Invest’s illegal activities can proceed simultaneously. “It is possible to sue the individual executives and employees of Haru Invest who committed illegal activities.” Personal assets of the employees, such as apartments, cars, and bank deposits, can be seized. Q. Why couldn't the Haru Invest “exit scam” be prevented? Investors were enticed by the promise of guaranteed high returns. Coin deposit schemes to attract investors are thriving in regulatory blind spots. Due to unverified high-return advertisements, there was a rush of blind investments. Careful decision-making is crucial when investing.
2023-06-30 NBN NEWS -
Media Coverage
How to Respond to the 'Withdrawal Suspension' Crisis of Delio and Haru Invest
Host: Director Han Chi-ho Guest: Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm Q. What is the Delio and Haru Invest incident? The suspension of virtual asset deposits by Haru Invest and Delio is causing a widespread impact. Haru Invest operated a virtual asset deposit service. Haru Invest is in a state of over-indebtedness or insolvency. Delio generated profits through the management of customer assets. After suspending withdrawals, Delio held meetings with users, but the extent of the losses has not been disclosed. Q. What are the legal perspectives on Delio and Haru Invest's 'withdrawal suspension'? 100 investors have filed fraud charges under the Special Economic Crimes Act, claiming it involved "financial investment products subject to the Capital Markets Act." Contractual breaches between the companies and investors could lead to compensation for damages. Preservation measures, such as provisional injunctions to prohibit the disposal of virtual assets, are expected due to the inability to dispose of assets freely. Delio and Haru Invest may apply for corporate bankruptcy or rehabilitation procedures. Q. What are the measures for victims of the Delio and Haru Invest incident? Capture all databases, including virtual asset deposit and withdrawal records. Consider both civil and criminal actions. Consider preservation measures. Monitor the progress of the case closely. Liquidate virtual assets into cash. Q. Is there national responsibility for the Delio and Haru Invest incident? Virtual assets lack sufficient legal protection. "Victims of Delio and Haru Invest are not receiving national protection." "In Korea, when issues related to virtual assets arise, the state avoids responsibility." A representative from the Financial Services Commission stated, "Delio's investment method is not under our jurisdiction." The Financial Services Commission needs to actively manage and supervise the situation.
2023-06-26 NBN NEWS -
Media Coverage
Haru Invest, false and exaggerated stock advertising tactics.
Haru Invest and Delio, virtual asset deposit services that suddenly suspended withdrawals, were effectively in a ‘regulatory blind spot’. The process of attracting investors mirrored the false or exaggerated advertising seen in capital markets, yet there were no regulations addressing this. Particularly, Haru Invest, an unlicensed business operating without proper registration in Korea, was left in a complete regulatory void. (omitted) The 'referral' system, a typical method used by unlicensed virtual asset exchanges in Korea to attract investors, was also employed. Referral marketing involves offering various benefits, such as fee discounts, when entering a referral code provided by cryptocurrency YouTubers and influencers. These YouTubers and influencers were reportedly paid a commission for each referral. There are claims within the industry that some YouTubers earned tens to hundreds of billions of won in referral fees when the market was booming. Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm stated, "Although the specifics of how referrals are conducted may vary, if they were actively promoted without disclosing the risks of the exchange, it could lead to criminal fraud charges or civil liability for damages due to illegal activities, so caution is necessary."
2023-06-23 etoday -
Media Coverage
Haru Invest, which suspended withdrawals, is suspected of establishing an overseas entity to avoid regulations.
As Haru Invest, a virtual asset deposit service provider, faces bankruptcy and becomes embroiled in fraud allegations, suspicions have arisen that the company established an overseas entity to evade domestic regulations. Additionally, after the service suspension, key executives went into hiding, leading to criticism from investors that this may have been a deliberate fraud. (omitted) The sudden suspension of deposit and withdrawal services by Haru Invest has intensified suspicions that Haru Invest and Blockcrafters may have intentionally engaged in fraudulent activities. While Delio, facing similar issues, has taken measures such as meeting with investors and issuing statements, Haru Invest has remained silent, fueling further concerns. The class-action lawsuit filed by Decent Law Firm on the 20th at the Seoul Central District Prosecutors' Office targets not only Haru Invest’s executives but also the executives, auditors, and management team employees involved in the operations of Blockcrafters. Decent explained that the inclusion of Blockcrafters' executives in the lawsuit is aimed at uncovering the exact cause of the Haru Invest crisis and understanding the previously unclear relationship between the two companies. One of the key issues in this lawsuit is the suspicion that Haru Invest may have improperly obtained information from Blockcrafters' accelerator (AC) business. Additionally, there are allegations that Haru Invest might have used this information to promise returns of over 10% annually, which is expected to be a focal point in the lawsuit. Pureun “Ian” Hong, managing partner at Decent Law Firm, stated, “The fact that Haru Invest and Blockcrafters share the same internal directors and office space is evidence that they are essentially the same company. There is also the possibility that sensitive information from projects Blockcrafters gained through its virtual asset investment processes, such as corporate presentation materials, may have been leaked to Haru Invest.”
2023-06-21 biz.chosun -
Media Coverage
Why is Haru Invest involved in a 'rug pull' controversy?
Host: Reporter Jang Se-jin Guest: Pureun “Ian” Hong, managing partner at Decent Law Firm Q. Why did Haru Invest suspend deposits and withdrawals? Haru Invest offers a virtual asset deposit service. On the 13th, it temporarily suspended deposit and withdrawal services, stating "issues with a partner company." Q. What is the current situation with Haru Invest? Haru Invest announced that "a problem occurred with a partner company," but did not disclose the name of the partner. "Investor anxiety is increasing." Q. How does Haru Invest operate virtual asset management? Haru Invest offers high annual interest rates when investors deposit coins. It guarantees fixed profits to investors. Q. Why does Haru Invest guarantee fixed profits? Haru Invest promised a 12% interest rate for Bitcoin deposits. Q. Is guaranteeing high fixed returns legally problematic? If virtual assets are managed in various ways, high returns are possible. However, if there are losses in the management of deposited assets, paying the promised interest becomes impossible. Haru Invest offers significantly higher interest rates compared to traditional financial institutions. Q. Is it possible for Haru Invest to guarantee such high fixed returns? Haru Invest conducts arbitrage trading using partner companies. Q. Is Haru Invest involved in a 'rug pull' controversy, and is there suspicion of a Ponzi scheme? If Haru Invest uses funds from new investors to pay interest, it would be considered a Ponzi scheme. Q. What is the Merge Point incident? The sale of Merge Money at a 20% discount was halted, leading to fraud charges. In the first trial, the court sentenced the defendants to 4 and 8 years in prison for embezzling funds for personal use. Merge Point's CEO, Jinhee Kwon, passed away, and the court dismissed the charges. Haru Invest is now being compared to the Merge Point scandal. Q. How can Ponzi schemes be identified? Coupang, with its rocket delivery service, reduced deficits for the first time in history. Tesla overcame capital erosion and is currently experiencing its longest rally. Understanding the business’s revenue structure and vision is crucial in distinguishing a Ponzi scheme. "The basic principle is High Risk, High Return."
2023-06-19 NBN NEWS -
Media Coverage
Haru Invest and Delio investors launch a 'class-action lawsuit.'
On the 13th, Haru Invest, a leading domestic virtual asset (cryptocurrency) management company, abruptly suspended deposits and withdrawals of investor assets and shut down its office. The following day, on the 14th, Delio, regarded as the top virtual asset management company in Korea, announced a suspension of deposits and withdrawals, citing the fallout from the Haru Invest crisis. (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, stated, "Although Delio's asset management methods and entities are not yet fully disclosed, it seems likely that Delio entrusted customer assets to Haru Invest, which in turn handed them over to B&S Holdings for management, where the issue may have occurred." The sudden suspension of deposits and withdrawals has left investors in a state of panic. They trusted the high interest rates of over 10% and deposited their virtual assets, but now they find themselves unable to recover not just the interest but even the principal. Attorney Hyeonsu “Elliot” Jin advised that investors should consider both civil and criminal legal actions. He said, "Given the large number of victims and the substantial amount involved, investors should collectively file criminal complaints and civil lawsuits to protect their assets." Additionally, he suggested that, depending on the nature of the contracts between the companies and investors, civil actions such as claims for the return of virtual assets and compensation for damages should also be considered. Attorney Jin explained, "Before embarking on long civil lawsuits and compulsory execution processes, there may be grounds to request an injunction to prevent the disposal of virtual assets or to freeze virtual asset claims." He also mentioned, "Haru Invest and Delio may file for corporate bankruptcy or rehabilitation due to insolvency and inability to meet obligations. If that happens, the court will review and investigate the company's remaining assets, convert them into cash, and distribute the proceeds to creditors. Creditors should be prepared by filing claims in advance." He emphasized, "It's important to capture account information, details of virtual asset holdings, and transaction records from Haru Invest and Delio in advance to prove your status as a creditor. Capturing all transaction details, including deposit and withdrawal histories, is also a good practice." He further advised, "For the time being, it’s wise to convert virtual assets into cash. Financial incidents tend to have a domino effect. Given the recent market turmoil caused by the U.S. SEC's regulation of virtual assets, it’s recommended to withdraw funds from centralized exchanges to avoid additional losses until the situation stabilizes."
2023-06-16 Korea Economy
