South Korea’s Cube Entertainment is under scrutiny after its CEO, Kang Seung-gon, was accused of allegedly misleading investors into a cryptocurrency investment that resulted in significant financial losses.
A coalition of investors has accused Kang of promoting Nestree, a cryptocurrency launched by South Korean blockchain firm Nestree Media Group, as a promising investment with guaranteed returns, according to a Jan. 9 report by local media outlet The Korea Economic Daily.
Nestree Media Group advertised itself as a blockchain-based technology company specializing in community-focused messenger services and e-commerce platforms. Its cryptocurrency, Nestree, 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 Nestree Media Group through a capital increase in March 2022, which triggered a tenfold surge in the cryptocurrency’s price in less than a month’s time.
However, not long after Kang’s comments, the token’s value reportedly crashed from a high of 59 won to around 39 won within a month, ultimately plummeting to single digits by the end of 2022.
Around this time, investors, some of whom reportedly invested as much as 80 million KRW (roughly $54,567) in the cryptocurrency, demanded their principal be returned, but Kang denied ever guaranteeing such returns.
Further investors alleged that at the time, Kang suggested they could recoup their losses by investing in other cryptocurrencies he claimed to be working on listing on domestic exchanges.
According to The Korea Economic Daily, Kang has dismissed all allegations as baseless and said he never advised anyone to invest in Nestree with a guarantee of principal protection.
Regarding Cube Entertainment’s investment in the project, he said it was a move to expand the company’s blockchain portfolio and affirmed that their collaboration with Nestree Media Group would continue as planned.
Kang also admitted to personally investing in Nestree 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 are proven true, and his actions might be deemed 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 charged several individuals in the past who were found guilty of such activities.
On Jan. 3, the Seoul Southern District Prosecutors’ Office’s Virtual Asset Joint Investigation Team arrested two individuals who allegedly profited from manipulating the price of the ACE cryptocurrency on Bithumb.
Similar charges were brought 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 its listing process.
In May of 2024, South Korea’s Ministry of Justice established a special task force to monitor and mitigate market manipulation and fraud in the crypto sector.
