Court Orders Cross Finance to Pay Coinone $261,000 in Damages

Coinone, a South Korean cryptocurrency exchange, partially won a damages suit against online lending platform Cross Finance Korea.

Digital Asset reported on June 23 that the 11th Civil Division of the Seoul Southern District Court ordered the defendants, including Cross Finance Korea, to jointly pay 361.692 million won ($261,000) to Coinone in a suit seeking restitution of unjust enrichment and damages.

Coinone had invested in Cross Finance-linked products since November 2023. The products were structured to provide short-term loans to merchant cash-advance companies backed by credit-card receivables, while giving investors the right to receive principal and interest. Coinone maintained investments of roughly 1 billion won to 4 billion won ($723,000 to $2.9 million) through early August 2024.

The first repayment delay occurred on Aug. 5, 2024, leaving Coinone with about 904.2 million won ($654,000) in unrecovered principal. The disruption was linked to a fraud case in which a Lumen Payments executive identified only by the surname Kim borrowed money using fabricated sales receivables. Kim was indicted on related charges and was sentenced to 15 years in prison, a ruling that became final late last year.

Coinone argued that Cross Finance failed to properly disclose the investment risks and sought to rescind the contracts on the grounds of fraud and mistake. The court rejected both arguments, finding that Cross Finance was also a victim of Kim's fraud.

The court did, however, find that Cross Finance knew Lumen Payments and the merchant cash-advance company were controlled by the same person and failed to disclose that fact to investors. It said that structure could heighten the risk of the products, and that Cross Finance failed to provide an adequate explanation or take additional measures, breaching its duty of care as an online lending operator.

The court capped Cross Finance's liability at 40% of the principal, taking into account that Kim's fraud was the direct cause of the loss and that Cross Finance was also a victim. As a result, it awarded only 361.692 million won ($261,000) of Coinone's claim of about 900 million won.