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Former Bithumb Chairman Lee Jeong-hoon Faces 8-Year Prison Sentence in Appeal

Lee Jeong-hoon, the former chairman of Bithumb, one of South Korea’s primary cryptocurrency exchanges, faces a potential 8-year prison sentence. The Seoul High Court is expected to deliver its verdict in the appeal case on January 18, 2024.

The legal battle revolves around accusations against Lee for his dealings with Kim Byung-gun, chairman of BK Group, in a potential acquisition of Bithumb. The prosecution alleges that Lee duped Kim Byung-gun out of 110 billion won (approximately $70 million) through a fraudulent agreement involving the listing of BXA tokens on the Bithumb exchange.

The prosecution claims that Lee was fully aware of the challenges in listing the BXA token but deliberately withheld this information from Kim. Furthermore, they argue that Lee’s restructuring plan for Bithumb aimed to profit from exchange tokens while evading financial regulations.

Lee’s defense team, however, challenges these allegations. They argue that inconsistencies in Kim’s testimony undermine his credibility. Moreover, they assert that Lee fulfilled all obligations as a seller and extended the payment deadline upon request, only to be unexpectedly sued by Kim.

The outcome of the appeal is critical, not just for Lee Jeong-hoon but also for the broader cryptocurrency industry. It is poised to set a precedent in legal disputes involving crypto exchanges and governance. Additionally, with Bithumb preparing for an IPO on the Kosdaq by 2025, the verdict will significantly influence the exchange’s future and the fate of BXA tokens.

The trial’s decision, expected in January 2024, could lead to a reassessment of governance structures in cryptocurrency exchanges and potentially attract increased regulatory scrutiny. The legal outcome will be a pivotal moment for the industry, potentially reshaping policies and practices in cryptocurrency exchanges.

Nexo Seeks $3 Billion in Damages from Bulgaria Over Investigation

Nexo, a cryptocurrency lending platform, has taken a significant legal step against the Republic of Bulgaria, seeking $3 billion in damages. This arbitration claim, filed through the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C., centers around allegations that Bulgaria engaged in wrongful and politically motivated actions against the company.

The origins of this conflict trace back to an investigation launched by Bulgarian prosecutors in early 2023. Nexo’s offices were raided over allegations of participation in an organized criminal group aimed at profiting from crypto lending. Four Bulgarian nationals, including Nexo co-founders Kosta Kanchev, Antoni Trenchev, Trayan Nikolov, and Kalin Metodiev, were charged following these raids. However, in December 2023, the case was dropped due to a lack of evidence and Bulgaria’s absence of a legal framework for crypto assets.

Nexo alleges that the investigation was baseless and has had a severe impact on its business operations and reputation. The company claims it was in the process of working with U.S. banks on an initial public offering (IPO), with a valuation estimated between $8 and $12 billion. Additionally, Nexo was reportedly close to finalizing a sponsorship deal with a major European football club, which would have significantly boosted its global exposure. Both of these lucrative opportunities were lost due to the investigation.

Apart from these setbacks, Nexo also faced legal challenges in the United States. The company agreed to a $45 million settlement with the U.S. Securities and Exchange Commission (SEC) and North American Securities Administrators Association (NASAA) over its Earn Interest Product. This led to Nexo discontinuing the product in April and eventually winding down its U.S. operations, citing a lack of regulatory clarity.

Nexo’s legal team, led by U.S. law firm Pillsbury Winthrop Shaw Pittman LLP, argues that the investigation by Bulgarian authorities was unjustified and oppressive, leading to significant financial and reputational damage. The claim, filed by Nexo’s Swiss subsidiary Nexo AG, seeks to recover lost opportunities and damages caused by the allegations.

Singapore High Court Upholds DeFiance Capital's Claim Against Three Arrows Capital

The High Court of Singapore recently ruled against Three Arrows Capital (3AC), a bankrupt cryptocurrency hedge fund, in its attempt to dismiss a lawsuit filed by Arthur Cheong, the founder of Web3 investment firm DeFiance Capital. The court recognized a valid trust relationship between DeFiance Capital and 3AC, acknowledging that the assets in dispute were indeed held in trust for DeFiance Capital’s investors. This decision stems from a lawsuit filed by Cheong in April 2023, wherein he contended that DeFiance Capital investors were the rightful beneficiaries of assets held by 3AC and that these funds should not be utilized to settle creditor claims against 3AC.

The background to this legal battle traces back to an agreement between Cheong and 3AC founders Su Zhu and Kyle Davies to launch an independent fund on the 3AC Group platform, which Cheong would own and control. This fund had access to 3AC resources and maintained segregated accounts and wallets under Cheong’s name. Despite the collapse of 3AC in July 2022 and its subsequent bankruptcy, DeFiance Capital was allowed by the Singapore High Court to sue 3AC’s estate to recover assets still under 3AC’s control. The court found that the cryptocurrency in the Fireblocks wallets, which remained under 3AC’s control, was held in trust, countering 3AC’s claims that DeFiance Capital’s claim was without merit.

This ruling is significant for several reasons, not least of which is its affirmation of the trust relationship in the context of cryptocurrency assets and the jurisdiction of Singaporean courts in such disputes. It underscores the legal complexities surrounding the control and ownership of digital assets in the evolving crypto landscape. The decision also highlights the challenges faced by investors and fund managers in securing and asserting their rights over digital assets, especially in cases where the entities holding these assets go bankrupt.