South Korean cryptocurrency lender Delio intends to take legal action against regulators, according to reports.

South Korean Bitcoin (BTC) lender Delio is reportedly gearing up for a legal challenge against regulators due to what it claims is a misinterpretation of the law, which has resulted in an investigation and significant penalties against the crypto lending company.

According to a report in a local newspaper, Delio asserted that the accusations of fraud and embezzlement made by the Financial Service Committee (FSC) are unfounded. The crypto lender contended that the regulator has misapplied the law in a context where there are no explicit regulations governing virtual asset deposit and management products.

The report indicated that the Financial Intelligence Unit (FIU) recommended the removal of Delio CEO Jeong Sang-ho through a sanctions announcement on Sept. 1. Delio argued that this clearly demonstrates that the financial authorities are exerting pressure on Delio to shut down operations instead of allowing it an opportunity to recover. The FIU also enforced a three-month suspension of business activities for Delio and imposed a fine of 1.83 billion Korean won ($1.34 million).

The company further cautioned that the assets confiscated by regulators could jeopardize its operational viability.

Sang-ho stated that these sanctions from the FIU leave significant room for unreasonable legal interpretations and arbitrary enforcement, and such actions by financial authorities could jeopardize the domestic virtual asset sector.

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The central issue of contention revolves around the interpretation of current laws, specifically whether a lending entity that provides cash using virtual assets as collateral qualifies as a virtual asset business operator and whether the act of enforcing a lock-up is considered “storage” of virtual assets under the Special Financial Services Act.

Delio maintained that it is ambiguous whether virtual asset deposits and management products fall under the category of financial products as defined by existing law. One of the firm’s attorneys pointed out that there are no specific provisions in the virtual asset-related laws and regulations concerning the virtual asset management sector.

The attorney remarked that the FIU has incorrectly classified virtual asset deposits and management products as financial investment products and has sanctioned them, which represents a misinterpretation of the law.

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