K-pop giant Cube Entertainment’s CEO under fire for misleading crypto investment guarantees

South Korea’s Cube Entertainment is under scrutiny after its CEO, Kang Seung-gon, was accused of allegedly misleading investors into investing in a cryptocurrency, causing significant financial losses.

A coalition of investors accused Kang of promoting Nestree, a cryptocurrency launched by South Korean blockchain company Nestree Media Group, as a promising investment with guaranteed returns, local media outlet The Korea Economic Daily reported Jan. 9. .

Nestree Media Group bills itself as a blockchain-based technology company specializing in community-driven messaging services and e-commerce platforms. Cryptocurrency Nestree was listed on major South Korean exchanges, including Coinone in August 2019 and Bithumb in April 2020.

In particular, the K-pop company’s CEO denied these allegations that Cube Entertainment invested 100 million won ($68,376) in Nestree Media Group through a capital increase in March 2022, resulting in a ten-tenth increase in the price of the cryptocurrency in less than a month. He did so following reports that it had led to a two-fold increase. .

However, shortly after Kang’s comments, the token’s value reportedly dropped from 59 won to approximately 39 won within a month, ultimately falling to single digits by the end of 2022.

During this time, investors, some of whom reportedly invested as much as 80 million KRW (roughly $54,567) in the cryptocurrency, demanded the return of their principal, but Kang denied that he guaranteed such returns.

Other investors claimed Kang suggested they could recoup their losses by investing in other cryptocurrencies, which he claimed were trying to list on local exchanges.

According to The Korea Economic Daily, Kang denied all the allegations as unfounded and said that he would never recommend anyone to invest in Nestree with the guarantee of principal protection.

Regarding Cube Entertainment’s investment in the project, he said that this is a move to expand the company’s blockchain portfolio and confirmed that their collaboration with Nestree Media Group will 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 Kang’s actions could be considered a form of market manipulation under South Korean law.

Pressure from South Korea against market manipulation

South Korean regulators do not take allegations of market manipulation lightly, having indicted many 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 made profits by manipulating the price of the ACE cryptocurrency on Bithumb.

Similar charges were leveled against an individual market maker in July, while four employees of crypto exchange Coinone were charged 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 reduce market manipulation and fraud in the crypto industry.