The Financial Service Committee (FSC) had recently filed allegations of fraud and theft against Delio, a Bitcoin lending company in South Korea. However, the company denies these charges, as reported in a local daily.
According to sources, the Financial Intelligence Unit (FIU) recommended the dismissal of Delio’s CEO, Jeong Sang-ho, through a sanctions announcement on September 1, 2023. Delio views this suggestion as a clear indication that financial authorities are pressuring the company to cease operations rather than affording them an opportunity to rectify the situation. The FIU imposed a three-month business suspension on Delio along with a hefty fine of $1.34 million.
Moreover, Delio expressed concerns that the assets seized by regulators could threaten its ability to continue operations in the cryptocurrency lending sector. The CEO of Delio, expressed his disappointment, saying:
“These FIU sanctions leave a lot of room for unreasonable legal interpretation and arbitrary application. Such behavior by financial authorities could potentially harm the domestic virtual asset industry.”
The root point of argument in this legal dispute revolves around the interpretation of existing laws. Specifically, whether a lending company that utilizes virtual assets as collateral when lending cash can be considered a virtual asset business operator and whether the act of imposing a lock-up on these assets constitutes ‘storage’ of virtual assets under the Special Financial Services Act.
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Delio argues that it remains unclear whether virtual asset deposits and management products should be categorized as financial products under the current legal framework. A legal representative for the firm emphasized that there are no provisions in the law for virtual asset-related regulations concerning the virtual asset management business.
Recently in a report by Todayq News on March 6, 2023, South Korean authorities prioritized digital asset cybercrime and identified dark web tracking, virtual asset analysis, and DDoS attacks as key areas for their cyber-terrorism investigation. They established a task force with three sub-departments to address cybercrime platforms. Now, Delio claims that the regulators unreasonably applied the law in a situation where clear regulations for virtual asset deposit and management products were lacking.