Sudden delisting of cryptocurrencies sparks legal battles

An electronic signboard at Upbit headquarters in Seoul shows the prices of cryptocurrencies, Monday. Yonhap

Upbit embroiled in lawsuit with Pica Project

By Park Jae-hyuk

Upbit's abrupt decision to delist 24 types of cryptocurrencies has prompted a series of lawsuits.

In addition to the ongoing legal battle with Pica Project, the issuer of Pica Art Money, the nation's largest cryptocurrency exchange operator is facing large-scale litigation from other virtual asset developers and several investors holding the digital coins that will be delisted from the exchange.

Last week, the Dunamu-owned exchange announced transactions of the 24 "risky" cryptocurrencies would be unavailable after June 28. The decision, which came as a surprise to many, was a move to brace for the enforcement of a revised law in September that will require cryptocurrency exchanges to follow stricter regulations.

A day before the announcement, Pica Project posted on its official blog that its digital coin would be delisted from Upbit and that the company had already hired EYP Law as its legal representative to protest the exchange operator's "unreasonable" decision.

Pica Project adviser Park Im-chool, who formerly served as an executive at the Financial Supervisory Service and the Korea Securities Depository, will also help the cryptocurrency issuer in its struggle with the exchange.

"Upbit has declined to mention specifics about the reason for delisting," EYP Law wrote in a statement. "For Pica Project and its investors, we will take all necessary legal action against Upbit."

Upbit said last week the reason for its decision to delist Pica Art Money was its issuer's distribution and sales of the digital coin on the market, which were conducted privately.

In response, Pica Project alleged Upbit had demanded it pay 25 million won ($22,000) worth of Pica Art Money for its listing in January, in contrast to the exchange operator's official stance that it has never been paid for listing cryptocurrencies.

Upbit issued a statement Monday that it will file criminal and civil suits against Pica Project for spreading "false information" with "malicious intent."

"Pica Project claimed that we had received digital coins from it and had sold 97 percent of them for a higher price, but we have never traded them after using them partially for a marketing event," Upbit said in the statement.

An electronic signboard at Upbit headquarters in Seoul shows the prices of cryptocurrencies, Monday. Yonhap

The conflicts between cryptocurrency exchanges and issuers are intensifying given that major exchanges are accelerating the delisting of risky virtual assets.

Piction Network, the issuer of pixel which will be delisted from Upbit this month, said it would not avoid a lawsuit. Quiztok, whose digital coin was removed from Upbit's won-denominated market this month, plans to file a lawsuit after figuring out the amount of investor losses.

The financial authorities are maintaining a cautious stance on the disputes, because they are not authorized to meddle with the listing and delisting of virtual assets, although they are positioned to supervise cryptocurrency exchanges.

Earlier this month, the Seoul Central District Court ruled in favor of Upbit against AnimalGo, which protested the delisting of GoMoney2 over allegations of false disclosure. However, it is unclear whether the court will make similar decisions on the forthcoming delisting of digital coins.

Amid the intensifying controversy, investors have complained about snowballing losses, as the prices of risky cryptocurrencies have dropped sharply in recent weeks.

"Retail investors are facing huge losses from the groundless delisting, but the exchange has not offered any apology or compensation," a petitioner wrote on the Cheong Wa Dae website.

Market observers expect investor sentiment will be worsened further, citing the tax authorities targeting the cryptocurrency industry lately.

According to industry sources, the National Tax Service's Seoul Regional Office started an irregular investigation earlier this month into Ground X, Kakao's blockchain subsidiary that developed the klaytn digital coin, over allegations of evading taxes through a special purpose entity in Singapore.

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