South Korean Bitcoin lender Delio is gearing up for an administrative lawsuit against regulatory authorities. This is according to a local report. Delio, which was accused of fraud and embezzlement by South Korean financial regulators and had its assets seized in July, is contesting the regulators’ actions.
Baseless Allegations and Regulatory Misinterpretation
Delio vehemently denies the allegations of fraud and embezzlement leveled against it by the Financial Service Committee (FSC). The crypto lending firm further contends that the regulators misinterpreted the law in their investigation, which resulted in severe penalties.
Notably, One of the central arguments put forth by Delio is the absence of clear regulations governing virtual asset deposit and management products. The company asserts that the regulator applied the law unreasonably, given the ambiguous legal framework.
Financial Intelligence Unit’s Decisive Actions
The Financial Intelligence Unit (FIU) played a pivotal role in the escalating conflict. On September 1, it recommended the dismissal of Delio’s CEO, Jeong Sang-ho, through a sanctions announcement. Delio views this move as evidence of the authorities pressuring the company to shut down. This is as opposed to allowing it to recover.
In addition to this, the FIU imposed a three-month business suspension on Delio and a substantial fine of 1.83 billion Korean won ($1.34 million). Delio raises concerns about the assets seized by regulators, fearing the potential impact on its operations.
Unreasonable Legal Interpretation
Furthermore, CEO Jeong Sang-ho argues that the FIU’s sanctions leave room for unreasonable legal interpretation and arbitrary application. Such actions by financial authorities, he warns, could seriously harm the domestic virtual asset industry.
At the heart of the dispute lies the interpretation of existing laws. The key question revolves around whether a lending company that uses virtual assets as collateral for cash loans qualifies as a virtual asset business operator. Furthermore, there is a debate about whether imposing a lock-up period constitutes “storage” of virtual assets under the Special Financial Services Act.
Unclear Regulatory Status
Also, Delio highlights the ambiguity surrounding the regulatory status of virtual asset deposits and management products. Lawyers representing the firm note the absence of provisions for virtual asset-related laws and regulations pertaining to the virtual asset management business.
Delio’s legal team asserts that the FIU erroneously categorized virtual asset deposits and management products as financial investment products. This further led to unjust sanctions.
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