Korea puts a number on custodial yield fraud: 15 years, and a registration regime that starts August 20

A Seoul court has sentenced Delio chief executive Jeong Sang-ho to 15 years in prison for virtual-asset deposit fraud and ordered his immediate detention ^[1]. The sentence lands alongside a tightened exchange registration regime that takes effect August 20 and a Financial Supervisory Service plan to inspect Bithumb over delayed withdrawals, which together move Korea from writing rules about custodial yield to punishing it ^[14][16].

The 11th Criminal Division of the Seoul Southern District Court, with Presiding Judge Jang Chan on the bench, imposed 15 years where prosecutors had sought 20 ^[1][2], or 75% of the requested term ^[23]. Sentencing came roughly three years and two months after Delio froze customer withdrawals in June 2023 ^[3].

The product was familiar. Delio took Bitcoin and Ethereum deposits, paid interest, advertised guaranteed annual returns of around 10% and called itself a "crypto bank"; the court found that marketing dishonest about how safe the product was ^[4]. Depositors were told the firm made money through arbitrage and coin-collateralized lending while early deficits and operating losses were concealed ^[5]. The court also found Jeong submitted falsified loan records worth 2 billion won to siphon roughly 1 billion won from an investment fund ^[6], and inflated the firm's coin holdings by 47.6 billion won in an audit report used to complete its virtual-asset business registration ^[7]. He was convicted under the Act on Aggravated Punishment of Specific Economic Crimes, among other charges ^[8].

The gap between the indictment and the verdict is the part operators should read twice. Prosecutors indicted Jeong in April 2024 without detention, accusing him of defrauding about 2,800 customers of roughly 250 billion won, or $175 million ^[9]. The court convicted on about 70 billion won taken from 1,078 victims ^[10]: 28% of the charged amount ^[18], about 38% of the alleged victims ^[19], and roughly $49 million on the source's own conversion ^[21], averaging about 65 million won per recognised victim ^[20]. Jeong's lawyers argued the prosecution's search and seizure was unlawful, and the court agreed, noting investigators handed Delio no seizure list even though the company owned the server database in question, and ruling the seized electronic data and anything derived from it inadmissible ^[11]. Many victims had petitioned for a heavy sentence and faulted Jeong for pushing blame onto other companies ^[12].

The rulemaking track is more concrete than the sentence. Lawmakers cleared a change that removes the 1 million won reporting threshold for crypto transfers and adds financial-health tests for exchange operators ^[13]; registration provisions start August 20 and the expanded Travel Rule follows in February 2027 ^[14]. From August 20, controlling shareholders of virtual-asset service providers face vetting on legal history, finances and social standing, operators must maintain sufficient anti-money-laundering staff and give 30 days' notice before ownership changes, and new entrants must hold a debt-to-equity ratio at or below 200% ^[15]. Note that the audit inflation the court found in Jeong's case was used to clear the old registration bar ^[7].

Separately, the FSS said it plans an on-site visit to Bithumb after altcoin withdrawals were delayed more than 13 hours; Bithumb blamed a temporary surge in requests that outstripped its hot-wallet balance and denied any shortfall ^[16][17].