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A South Korean court has released the son of software giant Hancom Group’s Chairman on bail as prosecutors continue to investigate an alleged “crypto slush fund” involving the Chairman Kim Sang-cheol. Kim Sang-cheol is suspected to be the “secret owner” of an altcoin named Arowana (ARW), developed by Arowana Tech. The coin was listed on the Bithumb exchange in mid-2021 but has since been delisted. Hancom is best known for its Hancom Office suite and has become a mainstay in the South Korean corporate world. The Criminal Division of the Seongnam Branch of the Suwon District Court arrested and indicted Kim’s 35-year-old second son, who will be tried on charges related to violations of economic crimes and breach of trust. The court also granted bail to an individual surnamed Jeong, the CEO of Arowana Tech, with restrictions imposed on their residence and movements ahead of the trial.

Prosecutors allege that from December 2021 to June 2023, the younger Kim and Jeong engaged the help of a domestic virtual asset consulting company to swap 14.57 million ARW for Ethereum and Bitcoin. The company raised almost $6 million from the sale, which was then transferred to the younger Kim’s personal electronic device. Additionally, an overseas cryptoasset business was asked to sell 4 million Arowana tokens on the younger Kim’s behalf, raising around $1.2 million in crypto. The funds were transferred to the younger Kim’s wallet, which prosecutors claim was then used for personal purposes, including purchasing non-fungible tokens (NFTs), trading, paying credit card bills, and buying goods from department stores. Hancom With, Hancom’s blockchain arm, has invested in Arowana Tech in April 2021 with the intention of building a blockchain-powered gold trading business. A suspected whistleblower released a transcript in October 2021 where Kim Sang-cheol seemingly stated that he “owned” Arowana Tech. Police raided Kim Sang-cheol’s home and Hancom offices in October 2022 as part of the ongoing investigation.

The court’s decision to release the younger Kim on bail at just under $375,000 came after prosecutors expressed concerns about the suspects’ flight risk. The court imposed restrictions on both Kim and Jeong’s residence and movements until the trial is concluded. Prosecutors believe that the younger Kim and Jeong’s actions were part of a larger scheme involving the conversion of ARW into other cryptocurrencies using the assistance of domestic and overseas crypto firms. The investigation also revealed that the younger Kim used the alleged slush fund for personal expenses, raising questions about the proper use of funds within the Hancom Group. Hancom has denied the allegations and maintains that it has not engaged in any unlawful activities related to the Arowana coin or its usage.

The Hancom Group Chairman Kim Sang-cheol has been at the center of the investigation since 2021, with allegations surfacing regarding his involvement in the Arowana coin and related transactions. Hancom’s blockchain arm, Hancom With, has been identified as a backer of Arowana Tech and invested in the firm in April 2021. The use of the slush fund allegedly acquired through questionable means has raised concerns about financial transparency within the Hancom Group and its subsidiaries. With the ongoing investigation and legal proceedings involving the younger Kim, Jeong, and other individuals connected to the case, the South Korean authorities are working to uncover the full extent of the alleged frauds and illegal activities. The release of the younger Kim on bail and the court’s decision to grant bail to Jeong indicate that the legal process is moving forward, but the outcome of the trial and the implications for Hancom Group and its Chairman remain uncertain.

The Hancom Group’s reputation has been tarnished by the allegations of a “crypto slush fund” and the involvement of its Chairman and other executives in potentially illegal activities. The release of the younger Kim on bail and the ongoing probe by prosecutors have cast a shadow over the company’s operations and corporate governance practices. Hancom’s Hancom Office suite, its flagship product, continues to be widely used in South Korea despite the controversy surrounding the Chairman’s alleged involvement in the Arowana coin scheme. As the investigation unfolds and more details come to light, the Hancom Group will need to address any concerns raised about its financial practices, transparency, and compliance with regulatory requirements. The outcome of the trial and any subsequent legal actions will have a significant impact on the future of the Hancom Group and its standing in the South Korean business community.

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