"We pioneered the token securities (STO) market from scratch for seven years, and now we face being pushed out."
Heo Se-young, head of Lucentblock, said this at a press conference in Gangnam District, Seoul, on the 12th. Token securities are designed to allow fractional investment in real estate, stocks, and bonds using Blockchain technology.
The startup Lucentblock ran the real estate fractional investment platform "Soyu" for years. The company said it was preparing for preliminary approval of an over-the-counter market for token securities by the Financial Services Commission, but is now on the verge of being eliminated after losing out to a consortium that includes a former senior official from the Financial Services Commission.
The Financial Services Commission will hold a regular meeting on the 14th to make a final decision on licensing an over-the-counter market that will handle the distribution of token securities. The Financial Services Commission held the Securities and Futures Commission on the 7th and was said to have effectively selected the NEXTRADE (NXT) and Musicow consortium, and the Korea Exchange (KRX) and Koscom consortium, as subjects for preliminary screening for an over-the-counter market for token securities. If so, Lucentblock would be eliminated.
Heo said the company was founded in Nov. 2018 after a regulatory sandbox (a regulatory exemption system) was created under the Special Act on Financial Innovation Support.
Lucentblock was designated an innovative financial service by the Financial Services Commission and has operated the token securities platform "Soyu," which allows fractional investment in real estate, since 2022. It recorded 500,000 customers and a cumulative public offering of 30 billion won. Once authorities confirmed the marketability, they moved to legislate, and Lucentblock also prepared for approval. The company said the situation became complicated as the NEXTRADE (NXT) and Korea Exchange (KRX) consortiums jumped into token securities during this process.
Heo said, "Selection of the NEXTRADE (NXT) and Korea Exchange (KRX) consortiums is likely, but they have no related track record," adding, "While our company was building the market from the ground up, those consortiums made no contribution to the token securities industry." The company said the NEXTRADE (NXT) and Korea Exchange (KRX) consortiums, which include former Financial Services Commission officials, are trying to freeride on a market developed by the private sector.
He added, "It is said that a consortium with no history of operating a business received higher scores in business plans, technology, and safety than our company, which has run a platform for 500,000 customers," and "This means they valued paper plans and nameplates submitted by large institutions over empirical data accumulated over years, undermining the fairness of the review."
Heo said, "The Special Act on Financial Innovation Support allows granting exclusive operating rights to innovative financial operators," adding, "It is intended to prevent the results of operators that attempted innovation through a regulatory sandbox from being copied after the fact."
He added, "Contrary to the legislative intent, during institutionalization we were not only denied protection for our results, we were stripped of even the right to operate the business and now face being pushed out."
Lucentblock claimed that NEXTRADE (NXT) stole its trade secrets. It said NEXTRADE (NXT) approached under the pretext of considering investment and consortium participation, signed a nondisclosure agreement, and siphoned off financial information, shareholder registers, and business plans. NEXTRADE (NXT) later entered the market separately and applied for approval. NEXTRADE (NXT) is an alternative exchange where stocks can be traded outside the Korea Exchange (KRX).
Lucentblock reported NEXTRADE (NXT) to the Korea Fair Trade Commission the previous day for obstructing business activities and violating merger filing obligations. Heo announced a one-person protest in front of the Government Complex Seoul at 10 p.m. on the 13th.
Heo said, "A corporation that tried innovation and took the lead in doing business is being forced out during institutionalization, and its place is being taken by corporations connected to financial authorities that made no contribution," adding, "We are not asking for special favors; we ask you to review this strictly by the book." An official at the Financial Services Commission said, "No decision has been made yet on which consortium to select."