Korean Cryptocurrency Industry Concerned over Overall Coin Market Downturn

Cryptocurrency has a spotty track record

There is no sign of an end in the aftermath of the suspension of deposits and withdrawals at Haru Invest, a Korean cryptocurrency management company. Delio, considered to be number one in the Korean cryptocurrency industry, suspended withdrawals, prompting investors to file a criminal class action suit against Delio and sending the situation spiraling out of control. The Korean virtual coin industry is now worried about the spread of negative publicity and stagnation in the market.

On June 16, Law Firm LKB & Partners filed a criminal complaint with the Seoul Southern District Prosecutors’ Office against Lee Hyung-soo, CEO of Haru Invest, and seven others including Jung Sang-ho, CEO of Delio, for fraud under the Act on the Aggravated Punishment of Specific Economic Crimes. About 50 investors in Haru Invest and about 50 investors in Delio participated in the complaint.

“The two companies promised to take deposits of customers’ virtual assets and inflate them without risk and at a high interest rate,” said Lee Jung-yup, a lawyer at LKB & Partners. “They kept quiet about their risky management method for virtual assets and invested customers’ virtual assets into risky futures and options transactions without customer consent.”

This incident once again raises awareness of the importance of the supervision of cryptocurrency companies. Haru Invest advertised stable annual returns of up to 12 percent per year and free withdrawals at any time. According to Haru Invest, about 80,000 members from more than 140 countries trusted the company with their money. But there was no supervision of the company by the financial authorities.

The atmosphere in the Korean cryptocurrency market is unsettled. In the United States, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance, the world’s largest cryptocurrency exchange, the CEO of Binance, and Coinbase in court on June 5 and 6 (local time), accusing them of violating securities laws. This triggered the market capitalization of all cryptocurrencies to evaporate by US$122.6235 trillion from June 6 to 11.

The Korean virtual coin industry fears an overall market downturn. “It seems that this incident increases negative public perception of the virtual coin industry along with the Rep. Kim Nam-kuk coin case,” said an official of the Korean cryptocurrency industry, “I am afraid that this situation will tarnish the reputation of not only a few companies but the entire cryptocurrency industry.”