The South Korean High Court confirmed the three-year jail term for the son of Hancom’s CEO. He created a $6.7 million altcoin “slush fund,” according to the court’s decision. This ruling followed the Suwon District Court’s initial verdict in August.
Legal Battle Over Altcoin Misuse
Kim Sang-cheol’s second son, whose first name remains withheld, appealed the lower court’s decision. However, the High Court rejected his appeal and upheld the original sentence. Prosecutors stated that he collaborated with Arowana Tech, an IT startup significantly backed by Hancom, to misuse Arowana (ARW) tokens for creating the slush fund.
The District Court ruled that he violated trust under the Specific Economic Crime Aggravated Punishment Act. Additionally, a 48-year-old executive from Arowana Tech, surnamed Jeong, received a two-and-a-half-year prison sentence.
High Court Rejects Appeals and Counterarguments
On December 11, the Suwon High Court’s Criminal Division dismissed appeals from both defendants and the prosecution. While prosecutors sought to extend Kim’s sentence to nine years and Jeong’s to six years, the court maintained the original rulings. The presiding judge explained:
“The District Court’s sentencing appears reasonable, and there is no justification to modify the sentences. Both the defendants’ and the prosecution’s arguments are dismissed.”
Accusations of Price Manipulation
Prosecutors accused Hancom With, Hancom’s blockchain arm, of conspiring with Arowana Tech to manipulate the price of ARW tokens. Between 2021 and 2022, the defendants allegedly traded these tokens to generate funds for the slush fund. Investigators observed that ARW’s value skyrocketed by 1,075 times within just 30 minutes after its listing on domestic crypto exchanges on April 20, 2021. The token’s price surged from $0.035 to nearly $38 before being delisted, which raised suspicions.
Misuse of Funds for Extravagant Spending
Prosecutors argued that the defendants misused the slush funds for personal luxuries. These expenditures included purchasing NFTs, investing in stocks, clearing credit card debt, and buying items from department stores. They claimed that the younger Kim held the authority to withdraw ARW tokens directly.
Senior Kim’s Potential Involvement
The prosecution continues to pursue legal action against Hancom’s CEO, Kim Sang-cheol. Although prosecutors requested an arrest warrant in July, the court denied it, citing no flight risk. Hancom, currently led by Kim’s eldest daughter Kim Yeon-soo, has denied any involvement in the scandal. Kim Yeon-soo has reportedly initiated management reforms and plans to restructure the company’s board of directors.
Hancom’s Legacy and Current Standing
Hancom remains a prominent software company in South Korea, known for its Hangeul word processor and Hancom Office Suite. Despite the controversy, the firm strives to regain public trust and stabilize its operations.
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