July 08, 2022 12:26
Young Korean cryptocurrency investors are lining up at bankruptcy courts after losing huge amounts of money when the bubble burst this year.
The Seoul Bankruptcy Court recently agreed to write off soured loans taken out by crypto bros, which is expected to prompt more of them to throw themselves on the mercy of the court.
According to court data, the number of people seeking personal rehabilitation during the first five months of this year increased by 2,600 on-year to 34,553. Most of the applicants are thought to be in their 20s and 30s.
Bankruptcy lawyers report a sharp increase in the number of young Koreans who got caught up in the Bitcoin craze. One office worker in his 30s borrowed W25 million on his credit card to invest in cryptocurrencies and even more from a subprime lender when the first investment was blown (US$1=W1,300).
"I used to be a hard-working salaryman, but turned into a horrible husband who is saddled with debt," he said.
Lee Seo-young at A-Part law firm said, "Even until early last year, most people in their 20s who went bankrupt had just defaulted on their credit cards, but recently about half of them lost all their money on cryptocurrencies. Their numbers have tripled over the last two years."
A Seoul Bankruptcy Court official said, "We don't keep separate statistics by reason for rehabilitation, but the number of people who lost money on cryptocurrencies has definitely surged."
Legal experts expect the trend to grow after the Seoul Bankruptcy Court made it easier for such defaulters to get the green light for rehabilitation.
The court in principle authorizes rehabilitation for debtors whose liabilities surpass their assets and count bank loans and other borrowings as assets. But under a new directive effective on July 1, it excludes the losses from stock or crypto investments they made with borrowed money from assets.
Suppose a person borrows W10 million from a bank, invests it in cryptocurrencies and loses W9 million. Before the new measure, the whole W10 million was included in their assets, but under the new measure only W1 million is included, which means their liabilities now exceed their assets.
But this has sparked criticism that the court is being too lenient with reckless gamblers who borrowed money to throw into a bottomless well, while those who only blew their own money cannot expect such leniency. Another area of contention is that only the Seoul court is implementing the directive but not those elsewhere in the country.
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