The Seoul Southern District Court’s 13th Criminal Division, led by Chief Judge Kim Sang-yeon, sentenced Bang, the majority shareholder of B&S Holdings, to 10 years in prison on August 13, 2024, for his involvement in a large-scale cryptocurrency fraud amounting to approximately 60 billion KRW (around $450 million). Bang’s fraudulent activities have been directly linked to the suspension of withdrawals at Haru Invest and Delio, two major cryptocurrency platforms, leading to significant financial losses for investors.
Background and Court Findings
Bang was found guilty of deceiving investors by claiming that their cryptocurrency assets, which he received from platforms like Haru Invest and Traum InfoTech, could be transferred to other exchanges. However, at the time of the transactions in November 2022, most of these assets were already frozen due to the FTX collapse, making such transfers impossible. The court highlighted that while Bang may have previously held assets valued between 400 billion to 500 billion KRW, the assets were largely inaccessible during the period in question.
The court also noted that Bang promised to cover any potential losses suffered by the investors, but this promise was deemed unrealistic given the circumstances. The judge concluded that Bang’s actions were a clear case of fraud, designed to mislead and exploit investors who trusted him with their assets.
Accusations of Ponzi Scheme Tactics
Throughout the trial, Bang argued that he had no intention of running a Ponzi scheme, but the court found otherwise. The evidence suggested that Bang engaged in a form of “robbing Peter to pay Paul,” where the funds from new investors were used to pay off earlier investors, creating an unsustainable financial structure. Just before receiving the assets from Traum InfoTech, the FTX crisis occurred, further complicating the situation and reinforcing the court’s view that Bang knowingly misled his clients to keep his operations afloat.
Broader Impact and Ongoing Investigations
The case primarily addressed the funds entrusted to Bang after November 2022, with Haru Invest suffering losses of 32.5 billion KRW and Traum InfoTech losing 24.2 billion KRW. Traum InfoTech, in particular, had entrusted assets given to them by Delio to Bang, exacerbating the financial damage when these assets became unrecoverable.
The prosecution is continuing its investigation into Bang’s activities before November 2022, which may reveal further instances of fraud and potentially increase his legal culpability. The case has sent shockwaves through the cryptocurrency market, emphasizing the need for stronger regulatory oversight and investor protections in the rapidly growing digital asset sector.
Legal and Market Implications
This ruling serves as a significant precedent in the legal treatment of cryptocurrency-related crimes in South Korea. It underlines the court’s commitment to addressing financial crimes within the digital asset sphere, which has often been criticized for its lack of regulation and oversight. The verdict is expected to influence future cases involving similar fraudulent schemes, providing a legal framework for prosecuting such crimes more effectively.
Moreover, the case highlights the vulnerabilities within the cryptocurrency market, particularly regarding centralized financial services and the risks of entrusting large sums of digital assets to third parties. Investors are likely to become more cautious, demanding greater transparency and security measures from the platforms they choose to engage with.
The sentencing of Bang represents a crucial step in holding individuals accountable for exploiting the relatively nascent cryptocurrency industry, and it sends a clear message that such fraudulent activities will not be tolerated. As the investigation into Bang’s earlier activities continues, the full extent of his impact on the market and the potential for further legal action remains to be seen.
