South Korea sentences Delio CEO to 15 years over crypto deposit fraud

A South Korean court has sentenced Delio’s chief executive Jeong Sang-ho to 15 years in prison for virtual-asset deposit fraud.

The sentencing comes roughly three years and two months after Delio abruptly froze customer withdrawals in June 2023.

How was the operator of Delio punished? 

The 11th Criminal Division of the Seoul Southern District Court, with Presiding Judge Jang Chan on the bench, has sentenced Delio’s chief executive, Jeong Sang-ho, to 15 years in prison, even though prosecutors originally sought 20 years.

Delio took in Bitcoin and Ethereum deposits and paid interest, advertising guaranteed annual returns of around 10% and branding itself a “crypto bank.” The court found that the marketing was dishonest about the product’s safety. 

Delio assured its depositors that it earned money through arbitrage and coin-collateralized lending while hiding early business deficits and operating losses. 

The court also found Jeong submitted falsified loan records worth 2 billion won to siphon roughly 1 billion won from an investment fund, and that he inflated the firm’s coin holdings by 47.6 billion won in an audit report used to complete its virtual-asset business registration.

Jeong was convicted under the Act on Aggravated Punishment of Specific Economic Crimes, among other charges. 

He was accused of defrauding around 2,800 customers of roughly 250 billion won ($175 million) when he was indicted by prosecutors without detention in April 2024. However, the court only convicted him on about 70 billion won taken from 1,078 victims.

That gap is due to an evidence dispute between Jeong’s side and the prosecutors. Jeong’s lawyers argued at last month’s final hearing that the prosecution’s search and seizure had been unlawful, and the court agreed the investigators’ search was flawed, noting that investigators handed Delio no seizure list even though the company owned the server database in question. It ruled the seized electronic data and any evidence derived from it inadmissible.

Despite the reduced amount, Jeong’s crime was described as severe. Many victims had reportedly petitioned for a heavy sentence and faulted him for consistently trying to push blame onto other companies.

How is South Korea combating crypto crime? 

Cryptopolitan recently reported that lawmakers in South Korea cleared a rule change that gets rid of the 1 million won reporting threshold for crypto transfers and adds financial-health tests for exchange operators. Registration provisions take effect August 20, while the expanded Travel Rule follows in February 2027.

From August 20, controlling shareholders of virtual-asset service providers (VASP) will face a new vetting system based on legal history, finances and social standing. Operators will be required to keep enough anti-money-laundering staff and give 30 days’ notice before ownership changes. New entrants must hold a debt-to-equity ratio at or below 200%.

The Financial Supervisory Service (FSS) also said it plans an on-site visit to Bithumb after altcoin withdrawals at the exchange were delayed for more than 13 hours. Bithumb blamed the delays on a temporary surge in requests that outstripped its hot-wallet balance and denied any actual shortfall.

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