Prosecutors in South Korea have reportedly arrested three top executives of HaruInvest, a crypto deposit platform, for allegedly defrauding customers and embezzling over 1 trillion won in coins, according to Yonhap News.
Just a day after a statement promising stricter screening of crypto executives was issued, the Seoul Southern District Prosecutors’ Office’s Joint Investigation Team for Virtual Asset Crimes has arrested three executives of HaruInvest.
“The arrests include co-CEOs, identified only as ‘A’ (44) and ‘B’ (40), along with the chief business officer ‘C’ (40)” under charges related to the embezzlement of approximately 1.1 trillion won from 16,000 customers.
From March 2020 to June 2023, the executives are accused of investing most of the customer deposits while misleadingly promoting their management strategy as ‘risk-free diversified investment techniques.’ This deception came to a head when HaruInvest unexpectedly ceased crypto withdrawals on June 13, 2023, subsequently entering reorganization proceedings.
HaruInvest claimed to be able to use algorithmic trading to take advantage of the “inefficiencies in the crypto market” to generate absolute profit for investors. Its strategies were compared to those of top trading firms such as Jump Crypto, with HaruInvest traders described as “the professionals” who know how to use specialized trading strategies that benefit from volatility rather than price movements. HaruInvest had previously lured investors with promises of up to 12% annual interest rates on crypto deposits, a proposition that now appears untenable in light of these developments.
CryptoSlate asked HaruInvest CEO Hugo Hyungsoo Lee about the risk of a drawdown on investments in an interview shortly after the FTX collapse in November 2023. Lee stated,
“The most important thing is that we deeply pour into the strategy, and we focus on the stable performance on a daily basis. What I mean is that our [unintelligible] is really almost zero. Zero monthly drawdown, and we only targeting the absolute return.
We do not exposure our position in the price volatility. We only focus on the gap or inefficiency in the market, and based on that gap or inefficiency, we just take a little amount of the profit on a high-frequency or a mid-frequency basis.”
HaruInvest’s decision to halt withdrawals was initially framed as a protective measure for investors following a business error attributed to misleading information from a consignment operator. However, the company’s failure to reopen withdrawals or adequately explain the circumstances has fueled speculation and concern among its user base.
The incident not only highlights the third-party risk associated with any investment type but also highlights the issues rife within the nascent crypto space. As new investors join the crypto market today, some 15 years after Bitcoin’s invention, the desire to share in outsized gains seen by those who came before is strong. Given the relatively young market, companies offering such dream returns with promises of novel investment strategies are both enticing and seemingly plausible.
As the investigation continues, the broader implications for trust in crypto investment platforms and the potential for regulatory reform remain a focal point of concern for Korean investors and authorities alike.
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- Source: https://cryptoslate.com/haruinvest-executives-arrested-in-korea-after-algo-trading-promised-zero-drawdown/
