P Xenos and M Bacina
South Korean Crypto Exchange CEO Jailed For 16 Years
It has been reported that the Seoul Central District Court's 24th Criminal Consensus has sentenced Kang-Seok-jun, 53 year old CEO of crypto exchange Coinup, to 16 years imprisonment, after being charged with fraud under the Specific Economic Crime Weighted Punishment Act.
The court found the crypto exchange CEO of being guilty of orchestrating a $386 million cryptocurrency scam, with seven other senior executives also bagging prison terms. The company’s vice president received a 7-year sentence while another senior member of the exchange receiving an 11-year sentence.
According to reports, Coinup promoted a fraudulent crypto investment scheme that promised 200% returns between 4 and 10 weeks. An excerpt from the court’s judgment reads:
They [the accused] created a plausible appearance, including a magazine with a current president’s composite picture, and portrayed the fraudsters in a deceptive, organized, and precise manner… The organization of the crimes, the number of victims, and the amount of damage show in the light of the truth that the sin is serious.
While delivering judgment, the court also blamed investors for not doing enough due diligence, stating that:
the victims are also responsible for spreading the damage by investing excessively in the thought of getting high profit in a short time.
The court’s verdict arrives in the hour where a significant amount of stakeholders in the country have lamented the over-regulated nature of the industry, spurring crypto commerce to friendlier shores. On this issue, Business Korea have stated that:
Experts point out that domestic blockchain projects are flocking to foreign exchanges largely due to tougher domestic cryptocurrency exchange market conditions. Investors cannot make or withdraw deposits in the Korean currency at Korean exchanges,
Excluding the nation’s four largest exchanges, some 200 smaller exchanges cannot open real-name virtual accounts. This is one reason cryptocurrency investors cannot benefit from investor protection.
However, it must not be forgotten that it was only a few weeks ago where the US Department of Justice revealed a massive international operation which led to the shutdown of a child exploitation website hosting more than 8 terabytes of child pornography, making it one of the largest illegal website shutdowns ever.
The Internal Revenue Service (IRS) Chief Don Fort had then affirmed:
Through the sophisticated tracing of bitcoin transactions, IRS-CI special agents were able to determine the location of the Darknet server, identify the administrator of the website and ultimately track down the website server’s physical location in South Korea
The bust would not have been possible without the transparent, immutable register inherent in the Bitcoin blockchain, and this is also the case with the sentencing of Kang-Seok-jun. The court found that Kang and his associates used investor funds to make a series of investments in seemingly worthless tokens, and awarded themselves a healthy share of the money they received. The presiding judge told the court that Coinup’s scam was “highly organized and paid great attention to detail," which we have come to understand, means a criminal context ripe for a blockchain bust.
What is perhaps most interesting about this aspect, much like the Mt Gox collapse of 2017, is that this investigation was privately handled due to the public nature of the fraudulent transactions, and that criminal activities such as investment fraud and money laundering are far from easy on a distributed ledger such as blockchain.