The Financial Services Commission (FSC) and the Financial Supervisory Service(FSS) said on Oct. 24 that investors should be careful about investing in virtual currency funds because various systems for protecting investors in the Capital Markets Act were not applied to virtual foreign currency funds. They came up with the explanation as recently, a financial product has been launched that cryptocurrencies collected from some investors are managed through initial coin offerings (ICO), and profits are distributed at their expiration dates.
Actually last month, Zeniex, which is a joint virtual currency exchange between Korea and China, launched ZXG Crypto Fund 1 as the first virtual currency fund in Korea and will hold the public subscription to the second fund this month. The product is said to be similar to funds as their websites show fund-related companies such as management companies, trustees and general fund administrators, management strategies and management fees posted on their websites.
However, the virtual currency funds have never been registered in the Financial Supervisory Service, and their financial investment guide on their homepage has not been audited by the Financial Supervisory Service. None of the management company, sales company and the trustee have been approved by the Financial Services Commission.
Under the Capital Markets Act, all funds must be registered with the Financial Supervisory Service, and public offering funds that collect funds from general investors must file securities reports. In addition, an asset management company that manages a fund and the fund sales company that sells it have to obtain necessary financial approval. Moreover, in order to protect investors, they must honor regulations on business practices such as the maintenance of minimum capital for soundness and the prevention of conflicts of interest and a duty to explain to investors.