Surge in Crypto Crimes in 2024: South Korea’s Escalating Battle Against Digital Asset Fraud and Regulatory Challenges
In Brief
South Korean police arrested two individuals for defrauding an elderly man of $4.1 million in cryptocurrency-related crimes, highlighting a surge in such crimes targeting vulnerable individuals.
Two people have been caught by South Korean police in a major blow against cryptocurrency-related crime. They were the ones who defrauded an elderly gentleman of an astounding 5.5 billion won, or almost $4.1 million. This case, which took place in the country’s quickly expanding digital asset market between September and December 2022, brings to light the worrying surge in crypto frauds that prey on the weak and the defenseless.
Usage of Real Estate Contracts for Hiding the Scam?
The offenders, who are said to be in their 20s and 30s, reportedly enticed their victims with extravagant monthly returns of 70% on digital currency investments, according to the Haeundae Police Station in Busan. By using misleading methods, they told the elderly person, “Cryptocurrency is having a boom.” I’ll call it 1.7 billion won in a month if you invest 1 billion won.”
Encouraged by these false promises, the victim sent the con artists 5.5 billion won in six different transactions. The scammers supplied bogus balance certificates and paperwork, such as fictitious balance sheets showing 20 billion won worth of cryptocurrency and manufactured real estate contracts, in order to preserve the appearance of validity.
The whole scheme was revealed as a shameless scam, though, since none of the victim’s money ever made it to a reputable crypto trading account. Although the criminals were apprehended due to the police’s prompt intervention, it is still unclear if the stolen money would be recovered.
The Broader Crypto Crime Landscape in South Korea
This well-known case is only one illustration of the growing number of illegal actions linked to cryptocurrencies in South Korea. The National Financial Intelligence Unit said that in 2023, local cryptocurrency firms reported an astounding 16,076 questionable transactions—a 49% rise from the year before.
The controversial case of Do Kwon, the co-founder of Terraform Labs, whose suspected role in the collapse of the Terra ecosystem in 2022 has garnered worldwide scrutiny, has further tarnished the country’s cryptocurrency scene. Kwon was reportedly freed on March 23, raising questions about the effectiveness of the justice system despite having been temporarily held in Montenegro in response to extradition demands from the Republic of Korea and the US.
Understanding the gravity of the problem, South Korean authorities are acting decisively to stop crimes connected to cryptocurrency. Notably, the Virtual Asset User Protection Act, the nation’s first complete crypto law, is scheduled to go into effect on July 19. By enacting harsher criminal penalties—life in prison in some cases—for manipulating the cryptocurrency market, conducting illicit trades, and participating in other illegal acts, this historic law seeks to protect investors.
Enhancing South Korean Investigative Capabilities
In an effort to better address the growing number of cryptocurrency-related crimes, South Korea is thinking of making its Joint Virtual Asset Crime Investigation Unit, which is now a temporary unit, a permanent department. Its members include about thirty professionals from several tax and monetary regulatory agencies.
With the hiring of more prosecutors and funding, the government hopes to strengthen the unit’s standing, provide specialized resources, and improve its operational effectiveness by elevating it to the rank of official department. This calculated action demonstrates South Korea’s will to successfully tackle illicit activity linked to cryptocurrencies.
Crypto Regulatory Reforms and Investor Protection
Apart from enhancing its investigation capacities, South Korea is proactively bolstering its regulatory structure concerning digital assets. The nation’s regulators want to publish new guidelines by the beginning of May that would impose stricter rules for token listings on centralized cryptocurrency exchanges.
The upcoming regulations are anticipated to ban the listing of digital assets linked to hacking events on domestic exchanges until the underlying reason has been fully examined and remedied. In order to increase openness and investor understanding, international cryptocurrencies that wish to be listed on South Korean exchanges will also need to publish a white paper or handbook that is specially designed for the home market.
In addition to putting a stop to illegal activity, South Korea is fostering legal activity in the digital asset market. The Democratic Party of Korea, which emerged victorious in the recent legislative elections in the nation, has promised to allow investors in South Korea to purchase spot Bitcoin ETFs both locally and abroad. Furthermore, should it obtain a legislative majority, the ruling People’s Power Party (PPP), which is in charge of the president, has pledged to postpone the introduction of taxes on the earnings from digital assets, which were initially planned to take effect in 2025.
Countering Emerging Scams and Phishing Attacks in South Korea
Crypto fraudsters continue to modify and advance their strategies in spite of government measures, preying on the weaknesses of gullible people. Scammers have been using frightening text messages to warn receivers of impending “burns” or losses of their Ethereum holdings if they do not take urgent action in an attempt to defraud South Korean cryptocurrency users.
These misleading communications, which seem to be coming from fake cryptocurrency exchanges, advise victims to click on embedded links that take them to phishing websites where passwords and sensitive wallet information are harvested. People in the community have been actively alerting others about these evil scams, spreading the word about them, and advising care and alertness.
Recognizing the rise in cyber fraud cases involving virtual assets, the National Police Agency reports that 38.3% of the 167,688 cases recorded in 2023 were related to cyber fraud. Authorities have pledged to step up their efforts to stop these nefarious operations, tracking and tracing unlawful transaction flows with the use of investigative methods.
How Should South Korea Behave in This Situation?
As the country navigates the challenges posed by crypto-related crimes, it must strike a delicate balance between fostering innovation in the digital asset space and ensuring robust security measures to protect investors and market integrity.
The adoption of the crypto law is a major step in this direction, establishing a comprehensive legal framework to deter and penalize fraudulent activities while promoting transparency and accountability within the industry.
Mr. Kim, a Seoul National University alumnus, said he agrees with the notion of regulating on the condition that more studies be done by the government on blockchain technology and the virtual currency market. Even if he accepts the necessity for control because of excessive speculation, he underlined that in order to reduce market volatility and investor reaction, regulations should be put in place gradually.
However, the efficacy of these measures will ultimately depend on the government’s ability to adapt and respond swiftly to emerging threats, coupled with effective collaboration between regulatory bodies, law enforcement agencies, and the crypto community itself.
By combining robust enforcement, investor education, and a commitment to fostering a responsible and ethical digital asset ecosystem, South Korea can position itself as a leader in the global crypto landscape, mitigating risks while harnessing the transformative potential of this burgeoning technology.
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About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
