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Criminal crypto fraud charges worth $650 million against Haru Invest have been dismissed
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South Korea's courts Recently Dismissed fraud charges against crypto mogul Lee Hen-su, CEO of Haru Invest.
The decision came down from the Seoul Southern District Court after a tumultuous year since Haru Invest abruptly halted customer withdrawals and shuttered its operations in mid-2023, igniting a firestorm of public scrutiny, investor concern, and legal action.
Lee and other executives of Haru Invest and its parent company Blockcrafters were accused of concealing risks, making inflated promises of returns up to 25% per year, and mismanaging funds to the tune of over $650 million affecting approximately 6,000 investors.
Prosecutors initially estimated the damages were well over a billion dollars, but later revised their estimation to $650 million. They sought a staggering 23-year prison term for Lee, arguing that the investment model constituted deliberate fraud.
A Shift in Perspective from the Courts
The court found that while management mistakes were present, Lee's actions didn't meet the criteria for criminal deception under South Korean law. External factors like the collapse of crypto exchange FTX and ensuing market turmoil were cited as key contributors to Haru's inability to fulfill its obligations to investors.
The court supported Lee's claim that Haru's business model incorporates legitimate investment strategies and generates profits, distinguishing the case from intentional Ponzi schemes.
Co-CEOs of Blockcrafters, who go by the last names Park and Song due to regional privacy standards, were also acquitted of fraud charges. However, the operational director of Blockcrafters, Kang, was found guilty of embezzlement and sentenced to two years in prison.
The verdict leaves the door open for civil suits, as the court emphasized that their decision pertains solely to criminal responsibility and not financial responsibility towards the affected investors.
Victims Strike Back - An Unrelated Incident
In a startling, yet unconnected incident, Lee was attacked during court proceedings in August 2023 by an individual who claimed to have lost thousands of dollars on Haru's investment platform. After a lengthy trial, the attacker was handed a five-year prison sentence in April 2024. Lee was fortunate to survive the attack with non-life threatening injuries and remains adamant about working to compensate victims through the bankruptcy process.
Shaping Crypto Regulation in South Korea
The Haru Invest ruling may influence future crypto-related legal interpretations in South Korea, particularly regarding fraud in instances where bankruptcy arises from external market shocks instead of deliberate deceit.
South Korea is intent on modernizing its digital asset regulations, and this high-profile decision may encourage further legal clarity on the obligations of asset custodians and investor protection.
Fun Facts and Interesting Details
- The acquitted CEO, Lee Hen-su, is contemplating making amends by launching a compensation fund for those affected by the fall of Haru Invest[4].
- The trial saw unexpected drama when an in-court attacker aimed a knife at Lee, urging the court to take action against him for defrauding investors[6].
- The decline of Haru Invest signaled one of the largest crashes in South Korea's crypto sector, leaving thousands of investors seeking compensation[7].
The results of this controversial case may serve as a guiding principle for the crypto industry in South Korea, highlighting the need for comprehensive regulations and investor protections. As the landscape evolves, we'll continue to keep you updated on key developments and regulatory changes.
Sources:[1] Coindesk.com/news/exclusive-haru-invest-ceo-accused-of-embezzlement-as-criminal-fraud-charges-dropped[2] Yonhapnews.co.kr/photos/2023/08/12/p20230812008800824.html[3] Cointelegraph.com/news/haru-invest-ceo-acquitted-of-charges-in-crypto-exchange-3bn-fraud-case[4] Businesskorea.co.kr/news/articleView.html?idxno=561458[5] Aju.asn.au/article/view.aspx?id=22100252%3B20230814S1100129138&pi=3[6] Navigin.co.kr/news/articleView.html?idxno=1955430[7] ZDNET.com/corp/news/crypto-investment-fund-haru-invest-goes-bankrupt-causing-chaos-among-coins-exchange-investors-7100073207
What does this ruling mean for the crypto industry in South Korea? The results of the controversial Haru Invest case may serve as a guiding principle, emphasizing the need for comprehensive regulations and investor protections. This high-profile decision may inspire further legal clarity on the obligations of asset custodians and investor protection in finance and industry.
