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A South Korean court has acquitted Lee Hyung-soo, CEO of crypto investment firm Haru Invest, of criminal fraud charges linked to the alleged mismanagement of investor funds amounting to over $650 million.

The decision, issued on Tuesday by the Seoul Southern District Court, comes nearly a year after Haru abruptly froze customer withdrawals and shut down operations in mid-2023.

The ruling follows intense scrutiny from prosecutors, investors, and the broader public, as the case became one of the country’s most prominent crypto-related legal battles.

Lee and several executives at Haru Invest and its parent company Blockcrafters were accused of misrepresenting investment risks while offering high-yield returns—allegedly up to 25% annually, before the company suspended operations.

Prosecutors initially estimated damages at over $1 billion affecting 16,000 users but later revised the figure to roughly $650 million tied to around 6,000 investors. The prosecution had sought a 23-year prison sentence for Lee, arguing the investment model constituted deliberate fraud.

Court Finds Lack of Criminal Intent Amid Broader Market Fallout

The court determined that while there was managerial failure, Lee’s actions did not fulfill the criteria for criminal deception under South Korean law. The judgment referenced external factors such as the collapse of the FTX exchange and subsequent crypto market turbulence, which contributed to Haru’s inability to meet investor obligations.

According to report, the court supported Lee’s claim that Haru’s business model involved legitimate investment strategies and generated real profits, distinguishing the case from deliberate Ponzi-style operations.

Co-CEOs of Blockcrafters, identified only by their surnames Park and Song due to South Korean privacy norms, were also acquitted of fraud charges. Kang, Blockcrafters’ chief operating officer, was cleared of fraud but found guilty of embezzlement and sentenced to two years in prison.

The verdict leaves open the path for civil litigation, as the court emphasized that the ruling only pertains to criminal liability and does not absolve the defendants from financial accountability to affected investors.

In a separate but related incident, Lee was physically attacked during court proceedings in August 2023 by an individual claiming to have lost 100 BTC, worth millions of dollars, in Haru’s failed investment platform.

The attacker was sentenced to five years in prison in April 2024. Lee survived the stabbing with non-fatal injuries and has continued to maintain that he is working toward compensating victims through bankruptcy recovery efforts.

Wider Implications for South Korea’s Crypto Regulation

The outcome of the Haru Invest case may influence future legal interpretations of crypto fraud in South Korea, especially in cases where business failure is driven by external market shocks rather than intentional deception.

South Korea has been actively updating its regulatory stance on digital assets, and this high-profile ruling may prompt further legal clarification around custodial responsibilities and investor protection in the crypto industry.

Lee’s acquittal, while relieving him of criminal charges, leaves unresolved concerns for thousands of investors still awaiting compensation. The bankruptcy proceedings and potential civil lawsuits will likely continue to shape the aftermath of one of South Korea’s most significant crypto collapses to date.

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