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Media CoverageBan on Bitcoin Spot ETF Violates the Principle of Legalism in Regulation
It is important to point out that the U.S. Securities and Exchange Commission (SEC)’s recent approval of Bitcoin spot ETPs (Exchange-Traded Products) submitted by 11 asset management companies on the 11th calls into question the Financial Services Commission (FSC)’s repeated stance against Bitcoin spot ETFs, which violates the principle of legalism in regulation, as stipulated in Article 4, Clause 1 of the Basic Administrative Regulations Act. (omitted) Attorney Pureun “Ian” Hong from Descent Law Firm also pointed out that ▶ there is no clear legal basis under the current Capital Markets Act to prohibit a Bitcoin spot ETF, ▶ the FSC is aware of this and, while claiming there is a potential violation of the Capital Markets Act, has not presented specific provisions, ▶ and that it is highly problematic that the FSC has banned Bitcoin ETF brokerage based on arbitrary judgments by an administrative body rather than legal grounds.
2024-01-23 NBN NEWS -
Media Coverage
Legal Experts Argue 'Bitcoin Spot ETF is Possible' Despite Opposition
The main reason the financial authorities have stated that a domestic Bitcoin spot exchange-traded fund (ETF) cannot be approved is due to a violation of the current 'Capital Markets Act.' The authorities argue that Bitcoin cannot be regarded as a type of underlying asset defined under the Capital Markets Act. However, the legal community offers a completely different interpretation, suggesting that it ultimately depends on the will of the financial authorities. (omitted) Article 4, Clause 10 of the current Capital Markets Act defines the types of underlying assets. These include: 1) financial investment products, 2) currency (including foreign currencies), 3) general goods, 4) credit risk, and 5) other risks belonging to natural, environmental, or economic phenomena that can be reasonably and properly assessed or priced using indicators, interest rates, or other methods. The Financial Services Commission (FSC) interprets this clause to mean that virtual assets are not included in the investment targets of collective investment vehicles such as ETFs. However, they distinguish Bitcoin futures ETFs, which are currently tradable, as tracking a derivative futures index and, therefore, differing in nature from a Bitcoin spot ETF that involves the actual purchase and holding of Bitcoin. However, the legal community focuses on Clause 10, Item 5 (assets that can be reasonably and properly evaluated or priced). Hyeonsu “Elliot” Jin, Managing partner at Decent Law Firm, explained, “Item 5 is a broad provision. Even if Bitcoin does not fall under financial investment products, currency, general goods, or credit risk, it is evident that Bitcoin can be classified as an economic risk that can be reasonably and properly priced, making it at least qualify as an underlying asset.” He further added, “The law only requires a simple condition: that the price of the underlying asset can be reasonably and properly calculated or evaluated.”
2024-01-23 Herald Economy -
Media Coverage
'I Trusted It Was a Well-Known Securities Firm'—Securities Firm Impersonation Scam
These days, many people use securities company apps for mobile trading when investing in stocks. Taking advantage of this, investment scams that impersonate securities company apps and executives are on the rise. Reporter Lee Sun-young has the details. (omitted) Pureun “Ian” Hong, Financial Fraud Specialist Attorney, said, "Apps installed through external links are completely exposed to hacking risks. Furthermore, in the case of real stocks, securities companies have safety mechanisms in place to protect investors even if the company goes bankrupt. Depositing money into an account other than your own (as instructed by the scam) is highly likely to be fraud, so please be cautious."
2024-01-08 MBC Gyeongnam -
Media Coverage
Will Binance Be Held Back by Its Lawsuit with the U.S. SEC?
After reaching the largest settlement in history with the U.S. government, Binance continues its lawsuit with the U.S. Securities and Exchange Commission (SEC), and Binance founder Changpeng Zhao has taken a firm stance against the SEC. On the 13th (local time), Binance submitted documents to the court arguing that "the SEC has focused on transactions in which tokens were purchased from other anonymous token holders on Binance's website," and "there was no contract with the initiators of these transactions to invest funds." They contended that the SEC's claims of illegal investment contracts and securities sales by Binance do not hold, and the lawsuit should be dismissed. They also mentioned that the term "investment contract" is ambiguous when applied to digital asset transactions. Binance emphasized, "The term 'investment contract' is vague when applied to digital assets, and this issue should be decided by Congress, not the courts." (omitted) Hyeonsu “Elliot” Jin, Managing partner at Decent Law Firm, stated, "The SEC's lawsuit is regarding violations of securities laws. The settlement with the U.S. government is a separate matter," and added, "Binance's motion to dismiss the lawsuit is unlikely to be accepted in principle. The settlement may work against Binance in the ongoing SEC lawsuit." As the SEC expressed its intent to proceed with the lawsuit, Changpeng Zhao's planned trip to the UAE was also canceled. Previously, a U.S. court granted Zhao permission to travel to his home in the UAE, but at the request of the Department of Justice, he was ordered to remain in the U.S. until the SEC's trial ruling in February next year. Attorney Jin explained, "The UAE is not a country with an extradition treaty with the U.S., and it has never accepted such requests from the U.S. Moreover, a significant portion of Changpeng Zhao's assets are understood to be outside the U.S.," adding, "The court likely determined that if Zhao were to leave the country, there is no guarantee he would return to the U.S. In the end, they saw the potential for Zhao to flee."
2023-12-13 Korea Economy -
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 -
Media Coverage
Hundreds 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
