A South Korean court on Tuesday found Lee Hyung‑soo, CEO of crypto lender Haru Invest, not guilty of fraud charges.
The Seoul Southern District Court’s 15th Criminal Division reached the verdict after reviewing allegations that Lee misled users and shut down withdrawals in mid‑2023. Thousands of investors had claimed losses when Haru froze accounts and closed its office.
Fraud Allegations and Company Shutdown
In June 2023, Haru Invest stopped withdrawals without warning. The company also shuttered its Seoul office. Customers had been promised that their principal deposits would be returned in full, along with annual interest rates as high as 25%.
When withdrawals halted, at least 16,000 investors found themselves unable to access their funds.
Prosecutors’ Claims
Prosecutors initially accused Lee and Haru Invest of stealing 1.39 trillion won(more than $1 billion), or roughly $1.02 billion, from those investors. They later reduced the charges to involve 880.5 billion won, or about $650 million, and around 6,000 affected users.
The Seoul prosecutors asked for a 23‑year prison sentence for Lee, charging him under South Korea’s Act on the Aggravated Punishment of Specific Crimes.
Haru Invest’s Defence
Lawyers for Haru Invest argued that the problems stemmed from external factors rather than fraud. They pointed to the collapse of the US crypto exchange FTX and the ripple effect it caused across the industry.
According to the defence, those events created a sudden liquidity crunch that forced Haru to pause withdrawals. They maintained that Haru ran a genuine lending business and generated real profits, unlike known fraud schemes.
Court’s Findings
The court agreed with the defence that the FTX bankruptcy was a key trigger for Haru’s troubles. Judges determined there was no clear evidence that Lee or his team had intended to defraud customers.
The abrupt suspension of user withdrawals was linked to the broader market crisis. The ruling emphasised that Haru had operated with a valid business model and actual revenue streams.
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Co‑Defendants and Sentencing
Alongside Lee, two co‑CEOs of Haru’s parent company, Blockcrafters, were also acquitted of fraud. Their names were reported only by surname, Park and Song, in line with South Korean privacy rules.
However, the company’s chief operating officer, Kang, received a different outcome. While Kang was cleared of fraud, the court found him guilty of embezzlement and handed him a two‑year prison sentence.
Civil Claims Still Pending
Although the criminal charges have been dismissed for Lee, Park, and Song, their civil liability remains. The court’s verdict does not erase the debts owed to investors.
Lee has said he is working through Haru’s ongoing bankruptcy proceedings to recover and return funds to customers. The company’s restructuring process will determine how and when victims might see partial or full compensation.
Impact on Crypto Lending in South Korea
The case has drawn attention to the risks of crypto lending platforms. Rapid interest offerings and promises of guaranteed returns have attracted many retail users.
But when major exchanges falter, smaller platforms can face sudden cash shortages. Regulators in South Korea have taken a closer look at crypto lenders since Haru’s collapse.
The not-guilty verdict for Haru Invest’s top leaders marks a turning point in the company’s long legal battle. While criminal charges are off the table, the work of restoring customer trust and settling civil claims now takes priority.
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