Several recent crypto fraud cases in South Korea illustrate the need for action. In November 2023, the Daegu Police Agency made multiple arrests and shut down a multi-level crypto fraud syndicate that lured its 4,000 victims with promises of guaranteed lucrative returns from a bogus digital asset. The police agency said that it had recovered 9.5 billion won (US$7.2 million) before indicting the 25 suspects.
Then in February, the Seoul District Court sentenced Bitsonic’s CEO, Jinwook Shin, to seven years in prison and the vice president of technology, referred to as Mr. A, to one year in jail.
The court found Shin guilty of fraud, forging and falsifying records, and obstructing a business via computer. The two men were the ringleaders of a fraud that bilked US$7.5 million from customers.
A new law will likely be helpful in combating crypto crime. The Virtual Asset User Protection Act aims to make it much harder for criminals to disrupt the digital assets markets and specifically addresses common illicit activity, such as using undisclosed information for crypto investments, manipulating market prices and engaging in fraudulent transactions. If proceeds from crime exceed 5 billion won ($3.8 million), the perpetrators can face a life sentence. Though the law was proposed in December, it will not come into effect until July 2024, so it is unclear how the suspects in the aforementioned crimes will be charged and sentenced. Given the amounts of money they defrauded from investors, under the new law, they could theoretically be sentenced to life in prison.
Additionally, South Korean regulators plan to release new guidelines imposing tighter regulations for token listings on centralized crypto exchanges by early May, according to Korean media. The new rules will likely prohibit listing digital assets with hacking incidents on domestic exchanges “unless the root cause is thoroughly determined,” while requiring foreign cryptocurrencies to issue a white paper or manual for the South Korean market in order to be listed on domestic exchanges.
At the same time, South Korea is working to support legitimate digital assets market activity. For instance, the Democratic Party of Korea, which won a landslide victory in the country’s recent parliamentary election, has pledged to allow South Korean investors access spot Bitcoin ETFs both domestically and overseas. The People’s Power Party (PPP), which holds Korea’s presidency, had pledged to delay taxes on digital assets’ profits, scheduled to take effect in 2025, if it won the parliamentary election.