Cube Entertainment, a powerhouse in South Korea’s music industry known for managing globally recognized K-pop artists like Pentagon, finds itself at the center of a scandal as co-CEO Kang Seung-gon faces accusations of misleading investors about the prospects of a crypto investment.
The company, which has long been celebrated for contributing to shaping the global Hallyu wave and diversifying into ventures like NFTs and blockchain technology, now grapples with the reputational fallout from these serious allegations.
According to the local report from Hankyung, Kang allegedly encouraged associates and investors to buy Nestree, a digital token from Nestree Media Group that guaranteed the safety of their principal investments.
While Kang denies these claims, his assurances reportedly caused numerous investors to suffer significant financial losses as the token’s value plummeted.
Victims are now contemplating legal action.
Cube Entertainment CEO’s Potential Crypto Lawsuit: Could He Defend Himself?
Nestree Media Group, a blockchain technology firm, initially garnered attention for its innovative approach to developing community-focused messenger services and e-commerce platforms.
The company was praised for its potential to revolutionize digital communication and online shopping.
Its services were perceived as a promising blockchain integration into everyday applications, which attracted a strong initial user base and investor interest.
Cube Entertainment’s involvement with Nestree began in March 2022, when the company invested 100 million KRW (approximately $68,376) in Nestree Media Group through a paid capital increase, acquiring a 40% stake.
News of this collaboration propelled Nestree’s cryptocurrency to notable heights, with its price soaring from 5 won to 50 won within a month.
According to the Hankyung report, amid the hype, Kang Seung-gon allegedly leveraged Cube Entertainment’s influence to encourage investment in Nestree, reportedly guaranteeing principal protection to potential investors.
Affected individuals claim that Kang’s assurances attracted investment from various groups, including securities industry professionals, Cube Entertainment affiliates, and even private loan lenders.
One investor, Person B, disclosed that they had invested 80 million KRW ($54,567) based on Kang’s promises. However, their holdings diminished by more than 70 million KRW as the token’s value plummeted by the end of 2022.
Nestree’s decline was swift. Despite its initial promise, the token’s price dropped to single digits within months, and its ecosystem suffered from inactivity.
The token ($EGG) has dropped from an ATH of $0.042 in April 2022 to as low as $0.0029 at the time of writing.
Source: Coingecko
While its e-commerce platform, Nestree Mall, remains operational, most listed products are sold out or discontinued.
Investors’ demands for Kang to honor his alleged guarantees were met with denials, and reports suggest Kang attempted to steer them toward other cryptocurrency opportunities to recover their losses.
Legal and Regulatory Implications
Under South Korea’s stringent financial and market manipulation laws, the accusations against Kang could carry severe consequences, such as potential imprisonment, significant monetary fines, and a ban on corporate governance.
Kang has categorically denied the allegations, stating that he never guaranteed investment returns.
The allegations against Cube Entertainment’s co-CEO now threaten to tarnish this legacy.
The company’s stock has already felt the impact, closing down 1.9% on January 9, 2025.
Meanwhile, South Korea’s regulatory landscape has grown increasingly vigilant.
In 2024, the Ministry of Justice established a specialized task force to combat fraud and manipulation in the crypto sector.
A report also emerged yesterday stating that regulators are considering reviewing the plan to let companies buy crypto this year.
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