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31 Dec 2021

The South Korean Supreme Court recently held that no charges of embezzlement or misappropriation can be framed against a South Korean crypto investor who used Bitcoins that were accidentally transferred - overruling earlier decisions by lower courts. A South Korean portal reported that the investor was exempt from criminal punishment on account of the absence of a legal basis for cryptocurrencies. According to the court decision, as reported by local media, embezzlement applies when one exploits the property of another in his possession - whereas Bitcoin is not seen as a property, but digital data.  

Coming to the facts, in June 2018, an unnamed investor received 199.999 Bitcoins from a wallet in Greece. The person then moved 199.994 Bitcoins, which was worth around US$1.25 million at the time, to two personal accounts. The recipient used three Bitcoins for personal expenses. As the action might have been penalized if taken out in fiat money and traditional bank accounts, the prosecutors turned the investor over on embezzlement charges as the primary purpose of the claim, and misappropriation as secondary, based on the Act on the Aggravated Punishment of Specific Economic Crimes.

Earlier, a lower court and an appeals court determined the investor was guilty of misappropriation, but not embezzlement. The investor was sentenced to 18 months in jail. 

However, the Supreme Court overruled that both charges do not apply to the crypto investor. It reversed the guilty charges from the lower courts and returned the case to the high court in Suwon. 

Kwon O-hoon, a partner at Cha & Kwon law firm, provided a further explanation on the case in an interview with Forkast.News. “South Korea separates embezzlement and misappropriation. Embezzlement is when one storing a property violates his obligations by acquiring that property. Misappropriation happens in a trust relationship, where one gains profit by betraying that trusted relationship,” Kwon says he found it strange that the receiver was found guilty of misappropriation, as it is difficult to see the sender and receiver, who were total strangers in the faulty transaction, to be in a trusting relationship. “I think [the lower court] wanted to give punishment for misappropriation for the time being”, Kwon was quoted by Forkast 

As the Supreme Court did not see Bitcoin as a property and the relationship between the two parties in the transaction to be insufficient to qualify for misappropriation, the investor was found not guilty of both.

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