'False Charging' HTS Coin System Manager Wins Lawsuit Over 2 Billion KRW Platform Usage Fees

[Asia Economy Reporter Kim Daehyun] A co-founder of Korea Blockchain Exchange, who was indicted and partially found guilty for inflating cryptocurrency trading volumes to embezzle investors' money, won the first trial of a lawsuit he filed against the company demanding 2 billion KRW in platform usage fees for the platform he built.

According to the court on the 24th, the Civil Division 18 of the Seoul Central District Court (Presiding Judge Park Junmin) recently ruled in favor of Choi in the first trial of the usage fee claim lawsuit he filed against the company.

Previously, Choi co-founded Korea Blockchain Exchange in 2017 with CEO Shin, taking full responsibility for the system operations. The cryptocurrency exchange operated by the company, 'HTS Coin,' launched its service in October of that year and attracted attention for its rapid growth. The underground shopping mall Gotu Mall at Seoul Express Bus Terminal partnered with HTS Coin from December of the same year and introduced Bitcoin payment services.

According to the 'Cryptocurrency Exchange Platform Usage Agreement' drafted by Choi and Shin at the time, Choi was to provide the independently developed exchange software to the company and receive 2 billion KRW as usage fees.

However, in May 2018, Shin and Choi were arrested and indicted on charges including embezzling investors' money. They were accused of manipulating the system to falsely credit points to investors who purchased cryptocurrencies, while the actual money received was transferred to executives' accounts and managed. Some charges were found guilty, and the following year, both received suspended prison sentences. Eventually, all cryptocurrency trading on HTS Coin and the Gotu Mall payment service were terminated.

Afterward, when the company, which had changed its name and CEO, did not pay the 2 billion KRW platform usage fee, Choi filed a lawsuit. During the trial, the company argued, "The platform in the usage agreement is not the software constituting the entire trading algorithm of the exchange as claimed by the plaintiff. The defendant outsourced the blockchain linkage program to another company." They also emphasized, "The platform provided by Choi had very poor basic performance, caused various errors, and we suffered losses by having to sign separate maintenance contracts with other companies."

Choi countered, "The platform in the usage agreement refers to the overall blockchain trading program between customers and the exchange. The program developed externally refers to the connection system between the exchange and the blockchain, so it is not the platform mentioned in the usage agreement."

The first trial ruled in favor of Choi. The court stated, "The plaintiff's supply of the exchange server, etc., was the plaintiff's most significant role related to the establishment and operation of the exchange, and the usage agreement was made as compensation for the overall software delivery." It added, "Considering the large amount of 2 billion KRW as usage fees, this is reasonable."

The court also took into account that former CEO Shin stated, "Choi provided the trading system of this exchange," and that without the exchange system provided by Choi in 2017, it would have been difficult for the exchange to open.

The company has appealed against this ruling.