South Korea’s Cube Entertainment is under scrutiny after its CEO, Kang Seung-gon, was accused of allegedly misleading investors in a cryptocurrency investment that led to significant financial losses.
A coalition of investors did that accused Kang of promoting Netree, a cryptocurrency launched by South Korean blockchain company Netree Media Group, as a promising investment with guaranteed returns, according to a January 9 report by local media outlet The Korea Economic Daily.
Netree Media Group advertised itself as a blockchain-based technology company specializing in community-based messenger services and e-commerce platforms. The cryptocurrency Netree was listed on major South Korean exchanges including Coinone in August 2019 and Bithumb in April 2020.
Notably, the K-pop company’s CEO made these claims following reports of Cube Entertainment’s 100 million won ($68,376) investment in Netree Media Group through a capital increase in March 2022, which led to a tenfold increase in the price of the cryptocurrency in less than a month. .
However, not long after Kang’s comments, the token’s value reportedly fell from a high of 59 won to around 39 won within a month, eventually falling to single digits by the end of 2022.
Around this time, investors, some of whom had reportedly invested as much as KRW 80 million (approximately $54,567) in the cryptocurrency, demanded their principal be returned, but Kang denied ever guaranteeing such a return.
Further investors claimed that Kang suggested at the time that they could recoup their losses by investing in other cryptocurrencies that he claimed to be working towards listing on domestic exchanges.
According to The Korea Economic Daily, Kang dismissed all allegations as baseless and said he has never advised anyone to invest in Netree with a head protection guarantee.
Regarding Cube Entertainment’s investment in the project, he said it was a step to expand the company’s blockchain portfolio and confirmed that their partnership with Netree Media Group would continue as planned.
Kang also admitted to personally investing in Netree, but claimed he did not profit from the investment.
Investors are reportedly considering legal action against Kang, who could face serious consequences if the allegations prove true. His actions could be considered a form of market manipulation under South Korean law.
South Korea’s crackdown on market manipulation
South Korean regulators do not take allegations of market manipulation lightly, having indicted several individuals found guilty of such activities in the past.
On January 3, the Virtual Asset Joint Investigation Team of the Seoul Southern District Prosecutor’s Office arrested two individuals who allegedly profited from manipulating the price of the ACE cryptocurrency on Bithumb.
Similar charges were filed against an individual market maker in July, while four employees of crypto exchange Coinone were indicted in May 2023 for alleged market manipulation involving 46 coins during the listing process.
In May 2024, the South Korean Ministry of Justice established a special task force to monitor and combat market manipulation and fraud in the crypto sector.
