South Korean Bitcoin lender, Delio, is preparing to file an administrative lawsuit against local financial regulators, citing a poor and incorrect interpretation of the law. This decision comes after the South Korean watchdog conducted an investigation and imposed a fine on the Bitcoin lending firm.
Earlier this month, the Financial Intelligence Unit (FIU) of South Korea recommended the dismissal of Delio CEO Jeong Sang-ho in a sanctions announcement. In addition, the watchdogs placed a 3-month business suspension on the company and issued a fine of 1.896 billion Won.
The sanctions were imposed based on allegations that Delio failed to assess money laundering risks before introducing new products and services, as required by the Specific Financial Information Act. The FIU claims that Delio did not comply with the requirements for approximately 41 products.
Delio is preparing an administrative lawsuit in response to the actions taken by the FIU. The company asserts that the allegations of embezzlement and fraud made by the Financial Service Committee against them have no foundation. Delio argues that the regulator unfairly applied the law because there were no explicit rules regarding virtual asset deposit and management products.
CEO Jeong Sang-ho criticizes the FIU’s sanctions as an unreasonable legal interpretation and unfair application. He warns of potential harm to the domestic virtual asset industry. Delio believes that the watchdog is pressuring them to shut down instead of providing an opportunity to correct their practices.
Earlier this year, the Financial Service Committee launched a comprehensive investigation into Delio, leading to the suspension of deposits and withdrawals of major virtual assets like Bitcoin, Ethereum, and Ripple. The investigation was initiated due to issues of breach of trust, fraud, and embezzlement connected to the network. Complaints from victims triggered the investigation.
Legal experts and industry influencers in South Korea have raised concerns about the classification of virtual asset-related deposit management products as financial products. Kwon Dan, the CEO of DK L Partners, argues that these products cannot be considered financial investment products under the definition of the Capital Markets Act because there is no possibility of principal loss. Other experts, like Oh-hoon Kwon, partner at Cha & Kwon, share a similar viewpoint, stating that the deposit of virtual assets should not be grouped as a financial investment product.
The FIU’s accusation that Delio violated its obligation to prohibit transactions with undeclared virtual asset business operators is also being scrutinized.
South Korea has been intensifying its crypto regulation efforts, especially after the Do Kwon saga last year. In August, the country established an interagency investigation team to tackle crypto-related issues.
– Financial Intelligence Unit (FIU) of South Korea: https://cryptopotato.com/south-korean-bitcoin-lender-delio-to-sue-regulators-report/(https://www.sedaily.com/NewsView/29UOI9SUI3#cb)
– Financial Service Committee: https://cryptopotato.com/south-korean-bitcoin-lender-delio-to-sue-regulators-report/(https://www.digitalasset.works/news/articleView.html?idxno=3228)
– DK L Partners CEO Kwon Dan: “Virtual asset deposits, staking, and lending are difficult to consider as financial investment products according to the definition of the Capital Markets Act because there is no possibility of principal loss.”
– Oh-hoon Kwon, partner at Cha & Kwon: “The deposit of virtual assets should not be grouped as a financial investment product.”
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