South Korean crypto CEO acquitted of $650 million fraud charges, months after stabbing incident: report

A South Korean court acquitted Haru Invest CEO Lee Hyung-soo of fraud charges on Tuesday, according to local news reports.

The Haru CEO faced fraud allegations when the company abruptly closed user withdrawals in June 2023 and shut down its office after allegedly luring thousands of investors by promising them a total return of principal and a hefty annual interest of up to 25%.

Prosecutors initially claimed that the company stole 1.39 trillion Korean won ($1.02 billion) from 16,000 investors, but reduced the amount to 880.5 billion won ($650 million) from around 6,000 investors in subsequent indictments, according to South Korean news agency Newsis. Prosecutors reportedly demanded 23 years in prison for Lee.

During a court trial in August last year, Lee was stabbed in the neck four times by a man who allegedly lost 100 BTC he deposited in Haru. While Lee did not sustain life-threatening injuries, the man was sentenced to five years in prison this April.

The Seoul Southern District Court ruled Tuesday that Lee's actions did not meet the legal standard for deception under criminal law, despite the undeniable management neglect attributable to Lee, according to a report from Digital Asset.

More specifically, the court reportedly found that Haru's abrupt withdrawal suspension was primarily linked to the FTX bankruptcy, which triggered a broader liquidity crisis. It also supported Lee's defense that Haru operated a legitimate business model with actual profits, unlike other fraud schemes.

Alongside Lee, Park and Song, the co-CEOs of Haru's parent company, Blockcrafters, were also acquitted of criminal fraud. Kang, the company's chief operating officer, was found innocent of fraud but guilty of embezzlement, receiving a two-year prison sentence. (Note: First names of all three were withheld in reports due to South Korean privacy standards.)

Meanwhile, the court noted that the ruling only relieves the defendants of their criminal responsibilities, not the civil responsibilities they owe to the victims. Lee previously said that he is working to recover damages through the bankruptcy process.