Lucent Block Alleges Unfair FSC Licensing Process for Fractional-Investment Exchange

Lucent Block holds press conference on fractional-investment licensing

CEO Heo Se-young says the number of licensed firms was capped without a formal vote

Company disputes rejection reasons including capital and governance

“Give us a chance to compete through additional licenses”

Lucent Block, which failed earlier this year to win preliminary approval for a fractional-investment (STO) over-the-counter exchange, alleged that the Financial Services Commission’s licensing process was unfair and opaque. The company argued that the FSC capped the number of licensed operators at two without a formal resolution.

At an emergency press conference held on Oct. 27 at Maru180 in Seoul’s Gangnam district, Chief Executive Officer Heo Se-young called for additional licenses to guarantee a fair chance to compete. He said the company was not seeking preferential treatment for startups, but fairness and transparency.

Lucent Block operates a platform that issues and distributes fractional real-estate investment products. In February, it lost out in the FSC’s preliminary review for a fractional-investment OTC exchange to the Korea Exchange consortium KDX and the Nextrade consortium NXT. At the time, the FSC gave Lucent Block low scores on capital, its funding plan, governance and conflict-of-interest prevention systems.

“FSC capped the number of licensees without a formal vote”

Heo argued that the FSC did not go through a formal vote when it decided to limit the number of approved firms to as many as two. At a regular FSC meeting on Sept. 3, 2025, the matter was handled only as a reporting item, he said. A press release issued the following day then stated that the number had been fixed at up to two.

He also took issue with the FSC’s correction to materials submitted to the National Assembly. The regulator had initially said the cap on licensees was approved through a resolution at a regular meeting, but later revised that explanation, saying it was a working-level error and that the matter had only been reported and discussed. The FSC’s discretionary authority should be exercised through a commission vote, Heo said, but no such vote took place in this case.

Heo also criticized what he described as a lack of objective grounds for limiting the number of licensees. In past approvals for internet-only banks and real-estate trust businesses, authorities reviewed factors including market competition, he said. This time, the FSC offered only a one-line rationale citing investors and the need to prevent liquidity fragmentation. He questioned the logic behind whether there should be one exchange or two.

He also challenged the review standards applied to existing sandbox operators. For OTC exchanges for unlisted shares, regulators first reviewed two existing sandbox operators, he said. For fractional-investment OTC exchanges, by contrast, regulators conducted a competitive review that included new entrants. He questioned why different standards were applied even though both markets were institutionalized under the same enforcement decree.

He said that approach also runs counter to the purpose of South Korea’s financial regulatory sandbox program. Under Article 21, Paragraph 1 of the Special Act on Support for Financial Innovation, innovative financial service operators may apply for the relevant licenses to continue their businesses after their designation period expires.

Existing operators have the right to apply for licenses under the law, he said, but in practice there is no door through which they can exercise that right.

“The stated reasons for rejection are also inaccurate”

Heo also disputed the reasons the FSC gave for rejecting the company. On governance, he said his own stake is about 35%, while the FSC cited a combined 51% including related parties and concluded that the company had the character of a closely held personal firm. He said the structure does not allow him to control other investors’ stakes at his discretion.

He also objected to the FSC’s assessment of capital. At the time of the application, Lucent Block had secured about $16.6 million in capital, according to Heo. That was not far from the roughly $21 million secured by the NXT consortium. It was about one-fourth of the approximately $65.2 million secured by the KDX consortium.

He also explained why Lucent Block did not form a consortium. At a meeting in August 2025, the Korea Exchange had said it would distribute fractional-investment products on its existing exchange, he said, while Nextrade had said it would not participate in the business. At the time, it was difficult to expect either institution to take part in the licensing process for a fractional-investment OTC exchange.

He added that Lucent Block was never asked to join a consortium.

He said the FSC should review those points and provide an additional licensing opportunity. The company is not asking regulators to revoke the licenses already granted, he said. It wants a fair chance to compete through additional approvals.

He also left open the possibility of legal action. The company is reviewing legal procedures, though it is unclear how long that would take. He said he hopes financial authorities will still make a policy decision.