Haru Invest Acquittal: South Korea Rules on Crypto Negligence vs. Fraud

Court Differentiates Negligence from Criminal Intent in Crypto Collapse

A significant South Korean court decision has drawn a sharp distinction between operational negligence and criminal intent within the realm of collapsed cryptocurrency platforms. Hugo Hyungsoo Lee, CEO of Haru Invest, along with other key executives, have been acquitted of criminal fraud charges. This verdict emphasizes that while mismanagement may be evident, it does not automatically constitute criminal conduct, especially when external market shocks contribute significantly to a platform’s downfall.

Background to the Haru Invest Proceedings

The acquittal follows a period of intense legal scrutiny that began after Haru Invest, a crypto yield platform, suspended withdrawals in June 2023. Korean law enforcement subsequently detained Lee and other executives in February 2024. Prosecutors initially accused them of misappropriating 1.1 trillion Korean won from approximately 16,000 investors, though these figures were later revised to alleged losses of 880.5 billion won impacting 6,000 individuals.

Judicial Rationale for Acquittal

The Seoul Southern District Court ruled that Haru Invest’s business model was not inherently fraudulent, notably citing its prior profitability. The court attributed the platform’s collapse primarily to external market forces, specifically the bankruptcy of the FTX exchange, rather than deliberate fraudulent schemes orchestrated by its leadership. While acknowledging management’s “negligence,” the presiding judge concluded that their actions did not warrant criminal punishment. It is important to note that Kan Mo, COO of Haru Invest’s parent company, Block Crafters, received a separate two-year prison sentence for unrelated corporate fund embezzlement, distinguishing his conviction from the main fraud allegations against the Haru Invest leadership.

Lingering Liabilities and Investor Impact

Despite the criminal acquittal, Haru Invest’s leadership retains civil liability to affected investors as the company proceeds through liquidation. The profound impact on investors was starkly illustrated in August 2024, when Hyungsoo Lee was reportedly stabbed by an alleged victim during a court session, underscoring the deep financial and personal distress caused by such platform failures in the volatile digital asset market.

Precedent for Digital Asset Regulation

This ruling sets an important precedent for global regulatory frameworks assessing accountability in the highly volatile digital asset sector. It suggests that judicial bodies may increasingly scrutinize the root causes of platform failures, differentiating between legitimate business risks or operational missteps and outright criminal deception. Such distinctions will significantly influence how future financial losses in the cryptocurrency space are legally classified and prosecuted, potentially shaping future regulatory approaches to market stability and consumer protection.