A South Korean court has acquitted Haru Invest CEO Lee Hyung-soo of fraud charges tied to the loss of approximately $650 million in crypto.
The 15th Criminal Division of the Seoul Southern District Court delivered the ruling, led by Presiding Judge Yang Hwan-seung.
Judge Yang’s Ruling
Local media reports revealed that the court found that while management had been negligent, the prosecution had not proven that Mr. Hyung-soo’s actions constituted criminal deception.
“It is difficult to deny the reason for the negligence of management, but it is hard to determine that it corresponds to deception, which is subject to punishment under criminal law,” the judge stated.
The executive had been indicted under the Act on the Aggravated Punishment of Specific Economic Crimes for allegedly defrauding thousands of customers of nearly $650 million.
Two co-defendants, Park and Song, who served as co-CEOs of Blockcrafters, were also found not guilty. However, the company’s COO, Kang Mo, was convicted of embezzlement. He received a suspended two-year prison sentence, three years of probation, and 120 hours of community service.
The court sided with the defense on three major points, including the sustainability of the business, whether its promotional act was deceptive, and whether there was negligence. The judge noted that Hyung-soo had operated a market-neutral strategy using customer assets and that the collapse of external entities like FTX contributed to the platform’s downfall.
Further, the court acknowledged that Park and Song had personally invested approximately 5.5 billion won ($3.85 million), while the Haru Invest CEO and his family deposited around 7.4 billion won ($5.2 million) into the company. These actions were interpreted as signs that the trio genuinely believed in the sustainability of the business.
The defense added that even after the suspension of withdrawals, the accused tried to find ways to recover the remaining assets from operating funds and distributed some of them to customers. Regarding interest payouts, the court determined that returns were based on actual performance with reasonable adjustments.
Ties to FTX Losses
Hyung-soo’s troubles started in June 2023, when his company abruptly suspended all deposits and withdrawals, citing “potentially misleading information” from its consignment operator. This action triggered widespread panic among investors who could not access their funds, with the crypto yield firm closing its Seoul offices soon after.
A day later, crypto lending firm Delio, which claimed to have deposited funds in Haru, also halted withdrawals. Following concerns raised by users of both platforms, South Korean law enforcement authorities started investigating Haru Invest and Delio, imposing travel bans on their top leadership and seizing company assets.
Even as Hyung-soo denied allegations of a rug pull, he and his two associates, Park and Song, were arrested for mismanaging $826 million in user funds. During their fraud trial, the Haru CEO was stabbed in the neck by an enraged former customer, who now faces up to 10 years in prison for attempted murder.
Hyung-soo’s firm was declared bankrupt in November 2024, with the latest chapter in the saga seeing him unburdened of any guilt in the business’s fall. While he and his fellow executives were accused of incorrectly informing customers that no losses occurred following the FTX bankruptcy, the judge ruled that they had been misled by an external fund manager identified only as Mr. Bang, who had falsely claimed to have moved funds before the FTX fallout and promised to cover losses personally.
Despite this, the court criticized Haru’s oversight of Bang and acknowledged possible contractual breaches of their duty of good faith. Nonetheless, it concluded that these did not amount to criminal fraud.
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