The Seoul Southern District Prosecutor’s Office has launched an investigation into three cases of alleged cryptocurrency fraud, according to a report by Hankyung on July 27, 2023. The newly formed joint investigation team for cryptocurrency crimes, which was established on July 26, 2023, is spearheading the investigation.
The cases under investigation involve Delio and Haru Invest, Pica Project, and WeMade, all of which are suspected of fraudulent activities related to their management. The joint investigation team has taken over these cases from the Financial Investigation 1 Department of the Southern District Prosecutor’s Office.
WeMade, the issuer of the virtual asset WEMIX, has been under scrutiny since 2021 due to various controversies. The company had previously faced criticism for liquidating KRW 225.5 billion worth of WEMIX without notifying users between November 2020 and January 2022. This led to a significant controversy and highlighted the importance of regulatory disclosure in the virtual asset market.
Haru Invest, a Singapore-based crypto investment manager, faced a crisis when CEO Hugo Lee had to apologize to its members for concerns arising from a recent incident. The company had to halt interest payments to all users and cooperate fully with authorities in response to legal actions initiated against it. The company had previously suspended withdrawals and deposits on the platform due to increased market volatility.
Delio, one of South Korea’s largest cryptocurrency lending companies, also faced a crisis when it had to halt interest payments to users. The company’s operations were in doubt after prosecutors raided the company following a fraud lawsuit filed by Delio clients. The company had previously suspended withdrawals and deposits on the platform, and it was reported that Delio withdrew KRW 9.24 billion (US$7.2 million) worth of its crypto holdings to three anonymous external wallets not disclosed by the company or the executives.
The investigation team, which includes most of the prosecutors from the Financial Investigation 1 Department, including Deputy Chief Prosecutor Gino Sung, who previously led the investigation into cryptocurrency malpractices, is expected to expedite the processing of these cases.
In addition, the case involving independent lawmaker Kim Nam-guk’s alleged large-scale coin holdings continues to be investigated by the Criminal 6 Department. However, as some of Kim’s allegations are linked to WeMade’s suspected illegal market-making, a joint investigation with the joint investigation team seems inevitable.
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