Jiwon “Rosie” Jang
P rosie@decentlaw.ioRosie served as a corporate lawyer at Gangnam Lawfirm and Hwaum Lawfirm, and handled corporate affairs for companies such as Naver Corporation, Lotte Home Shopping Co., Ltd., and Continental GmbH.
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법률정보Criminal Risks and Terms of Service Issues for Crypto Investment Information Providers in Korea
Criminal Risks in Operating Crypto Investment Information Services As the virtual asset market continues to grow, services such as crypto trading signal rooms, paid investment information memberships, and crypto advisory-style services have become increasingly common in Korea. At the same time, regulatory scrutiny over paid investment information services has been increasing. According to the Financial Supervisory Service’s 2024 inspection results for quasi-investment advisory businesses, violations were found in 112 out of 745 businesses reviewed, including cases involving unregistered investment advisory activities. While these figures do not directly relate only to virtual asset cases, they show that Korean regulators are paying closer attention to paid investment information services in general. In practice, disputes that begin as refund complaints may escalate into criminal complaints involving fraud, violations of the Financial Investment Services and Capital Markets Act, or violations of the Act on Reporting and Using Specified Financial Transaction Information. In these cases, terms of service, contracts, refund policies, and user communications often become key evidence. This article explains the major legal issues that may arise and why terms of service should be reviewed carefully before a dispute develops into a criminal investigation. Key Laws That May Apply Issue Main Legal Point Potential Penalty Fraud Obtaining property or financial benefit through deception Under the current Criminal Act, imprisonment for up to 20 years or a fine of up to KRW 50 million. The applicable law may vary depending on when the alleged conduct occurred. Capital Markets Act Violation Unregistered investment advisory activities may become an issue where the service involves security tokens or is combined with financial investment product advisory services Imprisonment for up to 3 years or a fine of up to KRW 100 million Specified Financial Transaction Information Act Violation Operating as an unregistered virtual asset service provider Imprisonment for up to 5 years or a fine of up to KRW 50 million E-commerce Law Violation Improper restriction of cancellation, withdrawal, or refund rights Administrative fines, corrective orders, or other administrative measures Administrative sanctions and criminal penalties may proceed separately. Depending on the facts, the same business conduct may give rise to more than one legal issue. Why Terms of Service Become Evidence in Criminal Investigations When a refund dispute turns into a criminal complaint, investigators often review the terms of service and user agreements at an early stage. Terms of service can show what kind of service the business claimed to provide, how it explained investment risk and refund conditions, and whether the actual operation matched what was written in the documents. In particular, investigators may compare the terms of service with the actual sales process, user communications, and service operation in the following areas. 1. Fraud and Deceptive Conduct For fraud allegations, investigators do not look only at whether the user suffered a loss. They examine what the business told the user, whether the possibility of loss was clearly explained, whether any statements implied guaranteed profits, and whether the written terms matched the actual service. If the terms of service clearly state that investment losses may occur and that the service does not guarantee profits, and if similar explanations were repeatedly given during consultations or user communications, these records may help dispute allegations of deception. On the other hand, if the terms contain disclaimers but the actual sales process included statements similar to “guaranteed profits,” “loss recovery,” or “risk-free trading,” the inconsistency between the written terms and the actual operation may become unfavorable evidence. 2. Capital Markets Act Issues Capital Markets Act issues do not automatically arise in every crypto investment information case. However, if the relevant virtual asset may be treated as a security token or if the service is connected with stock, derivatives, or other financial investment product advisory services, the operation may be reviewed under the Capital Markets Act. For example, even if the terms describe the service as “general information provided to an unspecified number of users,” the actual operation may still become problematic if it involved one-on-one recommendations, bidirectional paid chat rooms, or personalized investment judgments. In that situation, the terms of service may be compared against how the service was actually operated. 3. Virtual Asset Service Provider Issues Under the Specified Financial Transaction Information Act, a business may be required to register as a virtual asset service provider if it is not merely providing information but is also involved in virtual asset transactions, brokerage, transfer, custody, or management. Even if the terms of service define the business as an information service, the actual operation may be reviewed differently if the company handled user assets, executed trades, assisted repeated transfers, or received fees for transaction-related services. Supreme Court Guidance on Virtual Asset Service Provider Status In a case involving the Specified Financial Transaction Information Act, the Supreme Court of Korea held that a person may generally be regarded as a virtual asset service provider if they continuously and repeatedly conduct virtual asset transactions for the benefit of unspecified customers or users and receive compensation for doing so. This means that the actual substance of the service matters. If the business repeatedly participates in transactions and receives fees, it may be difficult to rely only on written terms stating that the service is limited to information provision. Key Issues to Review at the Early Investigation Stage For operators of crypto investment information services, the early stage of an investigation is critical. The following issues should be reviewed first. First, the consistency between the terms of service and actual operation should be checked. This includes the scope of service, refund conditions, risk disclosure language, and how the service was actually provided to users. Second, businesses should review whether any terms, advertisements, landing pages, chat messages, or sales scripts could be interpreted as guaranteeing profits or compensating losses. Since the 2024 amendments to the Capital Markets Act, restrictions on quasi-investment advisory businesses have been strengthened, including rules related to bidirectional channels and misleading profit-guarantee advertisements. Third, the communication channel should be reviewed. Whether the service was operated as a one-way information channel or as a bidirectional advisory channel may affect the legal assessment. Fourth, the initial statement to investigators should be prepared carefully. If the operator explains the terms inaccurately or gives statements that do not match the actual operation, it may become more difficult to defend the case later. DECENT Law Firm’s Virtual Asset Practice Team Cases involving crypto investment information services often involve multiple legal issues at the same time, including fraud, the Capital Markets Act, the Specified Financial Transaction Information Act, and e-commerce regulations. DECENT Law Firm’s Virtual Asset Practice Team assists clients from the early investigation stage by reviewing terms of service, service operation records, user communications, refund policies, and the legal issues relevant to each allegation. If you have been contacted by Korean investigative authorities, or if a refund dispute may escalate into a criminal complaint, it is important to review your response strategy before the first statement is given. This content is provided for general informational purposes only and does not constitute legal advice for any specific case.
2026-06-05 -
법률정보
M&A Legal Due Diligence Costs and Scope in Korea: A Practical Guide
The cost of M&A legal due diligence is not simply a lawyer’s fee. It depends on the size of the transaction, the complexity of the target company, and the scope of the review itself. For foreign companies and investors entering the Korean market, understanding how legal due diligence works is critical because the findings can directly affect pricing, indemnity structures, and even whether the transaction proceeds at all. What Is Legal Due Diligence in an M&A Transaction? Legal due diligence (LDD) is the process of identifying and reviewing the legal risks of a target company before completing an acquisition or investment. In Korea, legal due diligence is typically conducted after the signing of an LOI (Letter of Intent) and before the execution of the SPA (Share Purchase Agreement). Key review areas usually include: Material contracts and commercial arrangements Litigation and disputes Employment and labor issues Regulatory compliance Intellectual property rights Corporate governance and shareholder structure Licenses and permits Subsidiaries and overseas entities The purpose is not simply to “find problems,” but to assess legal exposure that may transfer to the buyer after closing. The results of due diligence often directly influence: Purchase price adjustments Representations & warranties (R&W) Indemnification clauses Escrow arrangements Closing conditions Deal restructuring decisions What Determines M&A Legal Due Diligence Costs? There is no fixed pricing standard for legal due diligence in Korea. Costs are generally determined by several combined factors. 1. Transaction Size Larger transactions typically involve: Broader review scope Higher legal exposure Increased reporting requirements More intensive negotiation support Cross-border transactions and strategic acquisitions usually require deeper review compared to early-stage investments. 2. Complexity of the Target Company Costs increase when the target company has: Multiple subsidiaries Overseas entities Large numbers of commercial contracts Regulated business operations Complex shareholder arrangements Convertible securities, SAFE, or stock option structures Industries such as fintech, crypto, healthcare, SaaS, and platform businesses often require additional regulatory analysis. 3. Scope of Due Diligence The scope of review is one of the biggest cost variables. • Full Scope Due Diligence A full-scope review examines the overall legal condition of the company in detail. This is commonly used in: Strategic acquisitions Large-scale M&A deals Transactions involving operational integration (PMI) While more expensive and time-consuming, it can significantly reduce post-closing legal risks. • Red Flag Due Diligence A red-flag review focuses only on major legal risks that could materially affect the transaction. This approach is often used by: Financial investors Venture capital firms Early-stage investors Buyers operating under tight timelines It is generally faster and less expensive, but risks outside the agreed review scope may remain unidentified. How Are Legal Due Diligence Fees Structured? In practice, Korean law firms usually structure due diligence fees in one of three ways. Hourly Billing Fees are calculated based on: Time spent Hourly rates of lawyers involved This model is commonly used when the review scope may change during the transaction. Fixed Fee A fixed fee is agreed upon based on: Defined review scope Estimated timeline Expected workload This structure offers budget predictability but may require additional fees if the scope expands later. Hybrid Structure Many mid-to-large transactions use a hybrid model: Base scope under a fixed fee Additional work billed hourly This approach balances flexibility with cost predictability. Data Room Preparation Also Affects Costs The quality of document organization can significantly impact due diligence efficiency. Well-structured VDRs (Virtual Data Rooms) reduce: Review time Additional document requests Follow-up interviews Reporting delays Poorly organized materials often increase both costs and transaction risks. Importantly, legal advisors can only assess documents actually provided to them. Missing or incomplete disclosures may limit the scope of legal responsibility and the reliability of the review itself. Why Due Diligence Findings Matter Legal due diligence findings can materially change the transaction structure. Purchase Price Adjustments Material legal risks may justify: Lower valuations Deferred payments Escrow retention Representation & Warranty Negotiations Discovered risks are often reflected in: Disclosure schedules Liability caps Survival periods Basket thresholds Specific indemnities Deal Restructuring or Termination Serious legal issues may lead to: Changes in acquisition structure Asset deals instead of share deals Conditional closing arrangements Transaction termination Proper Scope Design Is Critical One of the most common problems in M&A transactions is starting due diligence without clearly defining the review scope. When the scope is unclear: Costs become unpredictable Timelines expand Review items continue increasing Negotiations become inefficient A properly structured process usually follows this order: Define review scope Discuss fees and timeline Execute engagement agreement Open VDR and begin review Deliver due diligence report Reflect findings in SPA negotiations Legal due diligence should not be evaluated solely based on price. The more important question is whether the legal team can accurately identify transaction-critical risks and translate them into practical deal protections. Decent Law Firm advises domestic and international clients on M&A transactions, startup investments, cross-border acquisitions, and regulatory risk analysis in Korea. If you are considering an acquisition or investment in Korea and would like to discuss an appropriate due diligence scope and fee structure, our corporate advisory team would be happy to assist.
2026-05-11 -
법률정보
Startup M&A: Why It’s Back in Focus in 2026—and How to Use It Strategically
M&A is no longer a last resort. It has become a core strategy for accelerating growth. The global M&A market has clearly entered a recovery phase in 2026. As the pace of technological change continues to accelerate, companies are finding it increasingly difficult to keep up through internal development alone. As a result, acquiring critical technologies, data, and platforms through M&A has become a more prominent and practical strategy. This shift is especially visible in the startup ecosystem. Startup M&A as a Growth Strategy Today, many founders no longer view M&A as something to consider only when the company is struggling. Instead, it is increasingly used as a proactive tool to scale faster. Raising capital alone often has limits—whether in expanding market share, building in-house technology, or hiring top-tier talent. Acquiring a company with the capabilities you need can be a far more efficient solution. Common M&A approaches include: Horizontal Integration: Acquiring competitors or similar services to rapidly expand customer base and revenue (common in e-commerce, SaaS, and platform businesses) Acqui-hire: Acquiring teams with strong technical capabilities to secure both talent and intellectual property (frequent in AI, fintech, and legal tech) AI Roll-up Strategy: Acquiring underperforming companies and improving operational efficiency through AI (applicable across industries) In particular, industries such as healthcare, logistics, and legal tech—where data and automation are critical—are seeing a growing number of cases where larger SaaS companies acquire AI startups to enhance their product offerings. The Korean Market and Key Strategic Sectors In Korea, investment capital in 2026 is being concentrated in six key sectors: AI, biotech, content, defense, energy, and advanced manufacturing. Alongside this trend, founders are increasingly thinking beyond the traditional “fundraising → growth” model. Instead, a more strategic cycle is emerging: fundraising → strategic M&A → accelerated growth For startups operating with limited resources but facing intense competition, M&A can be one of the most powerful tools to quickly expand market presence and reshape the competitive landscape. When Should Your Company Consider M&A? For startups and growth-stage companies, there are several practical scenarios where M&A becomes highly relevant: Market Entry: When you need immediate access to local networks or infrastructure in a new market Technology Bottlenecks: When critical technology already exists externally but would take years to build in-house Team Building Challenges: When you want to onboard a proven, high-performing team at once Post-Investment Strategy: When you need to deploy capital efficiently after a major funding round However, M&A should never be pursued as an end in itself. A single transaction can impact shareholding structure, control, investor relations, tax, and employment matters. Without a clear post-merger integration (PMI) plan, even a well-executed deal may fail to deliver meaningful results. For Companies Considering M&A At Decent Law Firm, our Corporate Practice Group provides end-to-end legal support for startups, venture-backed companies, and SMEs throughout the entire M&A lifecycle. Our services include: Structuring and negotiating share purchase and asset transfer agreements Reviewing investment agreements and shareholder arrangements Conducting legal due diligence and transaction structuring Managing legal risks during post-merger integration (PMI) We approach M&A not as a one-time transaction, but as a continuous strategic process that directly impacts your company’s long-term growth. Ultimately, the key question is not whether to pursue M&A, but when and how to use it effectively. The right approach depends entirely on your company’s stage, resources, and strategic goals. If you are exploring whether M&A could be a viable growth strategy for your business, we encourage you to reach out. Our team will work closely with you to assess realistic options and design a tailored approach aligned with your objectives.
2026-04-27
