South Korean Bitcoin lender Delio plans to sue regulators: Report

Baseless allegations and wrong interpretation of law

South Korean Bitcoin lender Delio is reportedly preparing for an administrative lawsuit against regulators for the wrong interpretation of the law, which led to an investigation and a hefty fine against the crypto lending firm. Delio stated that the allegations of fraud and embezzlement made by the Financial Service Committee (FSC) are baseless. The company argued that the regulator unreasonably applied the law in a situation where there were no clear regulations for virtual asset deposit and management products.

Dismissal of CEO and business suspension

The Financial Intelligence Unit (FIU) recommended the dismissal of Delio's CEO, Jeong Sang-ho, through a sanctions announcement on September 1. Delio claimed that this was a clear indication that the financial authorities were pressuring them to shut down the business instead of allowing them a chance to revive. The FIU also imposed a three-month business suspension on Delio and a fine of $1.34 million (1.83 billion won).

Seized assets put operations in jeopardy

Delio warned that the assets seized by regulators could jeopardize its operations. CEO Jeong Sang-ho expressed concerns over the FIU's sanctions, stating that they leave room for unreasonable legal interpretation and arbitrary application. He added that such behavior by financial authorities could have a detrimental effect on the domestic virtual asset industry.

Interpretation of existing laws

The major conflict centers around the interpretation of existing laws regarding whether a lending company that uses virtual assets as collateral for cash loans is considered a virtual asset business operator. Additionally, it is unclear whether the act of imposing a lock-up constitutes 'storage' of virtual assets under the Special Financial Services Act. Delio maintains that virtual asset deposits and management products should not be classified as financial products under current law.

A lawyer for the firm pointed out that there are no provisions for virtual asset-related laws and regulations regarding the virtual asset management business. The lawyer argued that the FIU arbitrarily interpreted virtual asset deposits and management products as financial investment products, resulting in sanctions. This, according to Delio, reflects a wrong interpretation of the law.