The South Korean authorities are probing into a major crypto scam involving 215 perpetrators that has left over 15,000 individuals in financial doldrums.
At the center of this investigation is a popular YouTuber with nearly 620,000 subscribers, according to a 13 November 2024 local news report.
Alongside a network of quasi-investment consulting firms, the YouTuber duped victims for a staggering 325 billion Won ($232 million).
South Korea police arrest 215 in suspected $228 mln crypto scam https://t.co/oIkbVXrNaa pic.twitter.com/7M3coZGQ8C
— Reuters (@Reuters) November 13, 2024
Vulnerable Investors Promised With 20x Returns
The Gyeonggi Southern Provincial Police Agency in South Korea revealed that the organized fraud operation involved the issuance of 28 types of virtual assets. Six of these virtual assets were created and listed on foreign exchanges by the alleged Youtuber, whom authorities refused to name.
According to the police, the scheme ran from December 2021 to March 2023. The suspects attracted investors through exaggerated promises. This included claims of “20 times the principal” returns. Furthermore, victims were approached through an aggressive campaign that targeted over 9 million phone numbers acquired through YouTube lectures and ads.
Reports indicated that out of the issued coins, six were specifically fabricated by the group to create artificial demand and inflate prices. “These were later sold at marked-up rates to unsuspecting investors,” officials confirmed.
Korean authorities detailed how the remaining 22 types of coins, though not directly issued by the group, were of little value, often with minimal trading volume and scant information available in Korea.
Apparently, middle-aged and older investors are the ones heavily impacted by this scheme. Many victims reportedly took extreme financial risks, including selling their homes and securing loans to invest in the promised assets.
One of the officials remarked on the increasing sophistication of such scams, noting that “investment leading fraud crimes are becoming more organized and intelligent, producing many victims.”
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YouTuber Established Holding Company To Oversee 6 Consulting Firms, 10 Sales Corporations
The investigation seemingly uncovered a layered organizational structure behind the fraud. According to the police, the accused YouTuber established a holding company to oversee six consulting firms and ten sales corporations.
These companies were allegedly organized into 15 specialized groups, each assigned specific roles such as management, coin issuance, price manipulation, database supply, and money laundering.
With operations strategically divided, this setup allowed the organization to present a professional façade, complete with fake business cards and fabricated company identities, often impersonating officials from the Financial Supervisory Service.
This complex structure facilitated the scam’s reach and credibility. The group targeted individuals who had previously suffered losses in stock and coin investments. They exploited these individuals’ trust, promising recovery and compensation through investments in new coins marketed as profitable ventures.
The police reported instances where the perpetrators used fake phones and IDs to gather sensitive information, which was then leveraged to secure additional loans under the guise of compensating the victims’ previous losses.
Officials said “they impersonated financial authorities to build trust,” claiming that the imposters asked for personal identification proof to provide compensation for damages.
Record-Breaking Recovery Efforts And Police Crackdown
While authorities dig deeper into the organization’s operations, efforts are underway to recover funds. The police investigation, which began in February 2023, has meticulously traced over 1,444 accounts tied to virtual asset sales, detailing the intricate flow of funds through various channels.
Recently, the ringleader, who initially fled to Australia through Hong Kong and Singapore, was captured with 22 Bitcoins in their possession and was seized upon arrest.
A significant victory in the recovery process included the pre-indictment confiscation of 47.8 billion won($34.2 million) in assets linked to the scam. A portion of the recovery was intercepted through account tracking and other investigative techniques.
The police now aim to maximize restitution to the victims, though challenges remain, as significant portions of the funds were funneled through international channels.
Officials added, “We have applied for pre-indictment confiscation and preservation of the assets as we continue to identify further recoverable funds.”
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Korean Authorities Tightens Crypto Oversight
In response to rising instances of crypto-related financial crime, South Korea has introduced measures to intensify the regulatory oversight of virtual assets.
Deputy Prime Minister and Minister of Economy and Finance, Choi Sang-Mok confirmed that a virtual asset transaction monitoring system will be launched in 2025 to regulate cross-border crypto transactions. This system will require businesses to pre-register with relevant authorities and submit monthly transaction reports to the Bank of Korea.
“Since a basic law on virtual assets has not yet been established, it is unclear whether stablecoins traded across borders should be viewed as a means of payment or as capital transactions,” Choi noted. Moreover, he highlighted a regulatory gap that the new oversight intends to address.
2024 is a pivotal year for crypto-asset regulation, with Australia, the UK, Brazil, and South Korea set to unveil new rules.
Notably, 70% of the countries reviewed are making significant adjustments to their regulatory frameworks.
Stay informed!
pic.twitter.com/60yhg9Hunl
— SALL token (@SALLtoken) November 14, 2024
Furthermore, the information gathered will be shared among key agencies, including the Financial Intelligence Unit and Korea Customs Service. It will be done to aid in the prevention of illegal transactions.
Further reinforcing this oversight, Choi announced amendments to the Foreign Exchange Transactions Act slated for mid-2025. These amendments will redefine virtual assets within the legal framework, categorizing them under a distinct “third type” for better enforcement.
Addressing what he called a regulatory “blind spot,” Choi emphasized that South Korea needs clarity in how crypto assets are handled, particularly as “foreign exchange crimes rise in correlation with the recent surge in stablecoin listings and trading volume.”
In alignment with these changes, the Financial Services Commission is set to launch a 15-member Virtual Asset Committee this November to evaluate regulatory issues and propose policies to fortify compliance across South Korea’s virtual asset industry.
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