It has been revealed that some prepaid funeral service companies operating in South Korea used customer funds for cryptocurrency-related investments, incurring large losses.
According to a survey reported by local media, the total assets of 32 out of 75 prepaid funeral companies in the country are less than the prepaid amount they collect from customers. These companies account for approximately 42.7% of the sector.
Parents’ Love (부모사랑), ranked 7th in the sector, reportedly used leverage to invest heavily in the Bitmine ETF, an Ethereum-themed investment product. The company is said to have invested approximately 59.5 billion won in ETFs with double leverage, but the investment amount decreased to 10.2 billion won by the end of last year due to the plunge in the virtual currency market. As a result, the company suffered a loss of approximately 49.3 billion won (approximately $33 million).
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The report added that in South Korea, the prepaid funeral service sector is not considered a financial institution, but is considered part of the “prepaid installment transaction sector.” Therefore, companies are not subject to the strict regulations applicable to financial institutions regarding capital adequacy, investment in risk assets, or use of customer funds. Current regulations require companies to hold only 50% of the advances they collect from customers as collateral.
On the other hand, there are also reports that some companies were lending customer funds to major shareholders or affiliated companies.
*This is not investment advice.
