South Korean regulators were the most active crypto enforcers in all of Asia-Pacific in 2022. In 2023, the country’s regulators have also been particularly focused on enforcement against Terraform Labs, Bithumb, and other entities engaged in crypto market manipulation.
South Korean crypto regulation highlights
South Korean crypto enforcement activity
February 2023:
South Korean prosecutors arrested Kang Jong-Hyun, the de-facto owner of local cryptocurrency exchange Bithumb, for alleged embezzlement and stock manipulation.
January 2023:
South Korean prosecutors are seeking the arrest of Kang Jong-Hyun, the chairman and owner of cryptocurrency exchange Bithumb. Kang and two other executives – including his younger sister, Kang Ji-Yeon, the CEO of two publicly traded Bithumb affiliates, Inbiogen and Bucket Studio – were charged by the Seoul Southern District Prosecutor’s Office with embezzlement, breach of trust and fraudulent illegal transactions.
The offices of Bithumb were raided as part of an investigation into price manipulation of a coin listed on its exchange. Prosecutors were investigating transactions related to a specific person or entity moving the price of the coin to make a profit. "This is a search and seizure to secure the transaction details of a specific coin, and it has nothing to do with Bithumb," an official for the Seoul Southern District Prosecutor’s Office said.
South Korea’s Supreme Court ordered Bithumb to pay damages totaling 251.4 million won (US$202,400) to more than 100 investors over a service outage that occurred on November 12, 2017.
The National Tax Service is reportedly investigating possible tax evasion via domestic and international transactions of Bithumb Korea, Bithumb Holdings and affiliates.
Former chairman of Bithumb Holdings, the parent company of crypto exchange Bithumb Korea, was acquitted of charges that he committed $100 million in fraud.
Prosecutors indicted 20 people on charges of illegally remitting about 4 trillion won ($3.2 billion) worth of funds overseas to buy cryptocurrencies abroad and sell them back in Korea at a premium. The Seoul Central District Prosecutors Office, in collaboration with the Seoul branch of the Korea Customs Service, indicted 11 of them with detention and the nine others without detention, the officials said.
December 2022:
Six executives involved in the $1.5 billion (2 trillion won) crypto exchange fraud V Global received prison sentences ranging from three to eight years.
Seoul Southern District Court approved an order to freeze 120 billion won ($92 million) in assets of former and incumbent CEOs of Terraform Labs’ affiliate firm Kernel Labs.
November 2022:
Seoul Southern District Court approved an order to freeze approximately $104.4 million (140 billion won) from Terraform Labs co-founder Shin Hyun-seong based on suspicion of unfair profits for selling pre-issued Terra tokens to investors.
South Korea’s Seoul Southern District Prosecutors’ Office raided Chai Corporation, the local payments technology company founded by Terraform Labs Pte. Ltd. cofounder Daniel Shin or Shin Hyun-seung. Prosecutors are investigating Shin and Chai under allegations that the company used customers’ personal information in launching Chai’s Terra payment services without consent.
October 2022:
South Korean prosecutors arrested a Terraform Labs employee. This was their first arrest under the investigation of the Terra-LUNA collapse.
September 2022:
South Korean prosecutors asked Interpol to issue a red notice against Do Kwon, the co-founder of Terraform Labs, alleging that he is refusing to co-operate with an investigation into the $40bn implosion of the terraUSD and luna tokens.
A South Korean court issued an arrest warrant against Do Kwon, the co-founder of the now defunct stablecoin issuer Terraform Labs and five additional individuals.
August 2022:
The Korea Financial Intelligence Unit (KoFIU) announced that it notified illegal business activities of 16 unregistered Virtual Asset Service Providers (VASPs) to the investigative authority. The 16 VASPs: KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, NTCEX, BTCC, DigiFinex, Pionex.
- The 16 foreign-based VASPs were found to have been engaged in business activities targeting domestic consumers by offering Korean-language websites, having promotional events targeting Korean consumers and providing a payment option that supports the purchase of virtual assets using credit cards.
- The 16 aforementioned entities were found to have business operations targeting Koreans without obtaining a registration.
- (Note on regulations: On July 22, 2021, the KoFIU notified foreign-based VASPs that have business operations targeting Koreans about their obligation to register their business with the authority pursuant to the Act.)
- The KoFIU has requested the Korea Communications Commission and the Korea Communications Standards Commission to block domestic access to the websites of unregistered VASPs to prevent the use of virtual asset services provided by unregistered entities.
- Credit card companies will inspect and block credit card-based virtual asset purchase and payment services offered by foreign-based VASPs to disable their use in domestic market.
July 2022:
The Seoul Southern District Prosecutors Office reportedly raided the offices of crypto exchanges Upbit, Bithumb, Coinone, Korbit and Gopax, among others over their connection to Terraform Labs.
May 2022:
South Korean police arrested four people for scamming 1.7 billion won ($1.3 million) out of investors who transferred money on a fake cryptocurrency exchange that they operated.
May 2022:
South Korean authorities subpoenaed all Terraform Labs employees to investigate any internal role in market manipulation. Authorities also requested crypto exchanges to freeze funds associated with the LFG.
February 2022:
Former V Global CEO Lee Byung-gul was sentenced to prison for 22 years and ordered to pay a 106.4 billion-won fine by a court in Suwon.
July 2021:
Thirty-three people were investigated in South Korea for engaging in illicit crypto transactions worth 1.69 trillion won (US$1.48 billion). Fourteen of the people were referred for prosecution, 15 were fined and four remain under investigation.
January 2019:
Two executives from South Korean crypto exchange Komid were sentenced to jail time for faking trading volume and deceiving investors. CEO Hyunsuk Choi, the court found, made a number of fake accounts on the exchange in January 2018 and, using a trading bot, made millions of false transactions. (Market manipulation)
January 2018:
The Korea Communications Commission (KCC) issued fines totaling 141 million won ($130,000) to eight domestic cryptocurrency exchanges for providing insufficient user data protection. The exchanges were found to be violating the Information and Communication Network Act, which mandates user privacy protection methods. The exchanges fined were: Upbit, Ripple4y, Coinpia, Youbit, Korbit, Coinone and Coinplug, as well as Eyalabs, a cryptocurrency wallet service. The fines ranged from $9,000 to $14,000 each.
