A South Korean district court has sentenced executives of a local crypto exchange to prison. The CEO of the exchange got a 16-year jail sentence while other executives and their accomplices got between six and 11 years. They duped thousands of investors, promising them up to 200% return within weeks.
Also read: Korean Presidential Committee Pushes to Legalize Crypto
Hefty Sentences for Crypto Exchange Executives
The Seoul Central District Court has reportedly handed hefty prison sentences to executives of local cryptocurrency exchange Coinup. Judge So Byeong-seok sentenced 53-year-old CEO Kang Seok-jung to 16 years in prison for committing fraud under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes. In addition, the exchange’s CFO was sentenced to 11 years in prison while other executives and their accomplices got between six to nine years each. The executives were arrested in March on suspicion of investment fraud.
Coinup’s executives duped about a thousand investors from August last year to February this year, local media detailed, adding that they collected approximately 450 billion won (~$386 million) from them. Yonhap News described:
They said that the value of the cryptocurrency they pointed to would increase significantly, and they said that if they invested in packaged products, they would pay up to 200% after 4 to 10 weeks.
The Scheme
The executives lured people to invest in an unlisted cryptocurrency, convincing them that its value will skyrocket once it is listed. However, the coin was never listed and investors lost money. Instead, the exchange paid early investors with money collected from those who invested later.
Investigations into the Ponzi scheme revealed that, in order to mislead investors, Kang displayed a fake magazine at the exchange’s office with a photo of him standing next to South Korean President Moon Jae-in. The judge explained:
They created a plausible appearance, including a magazine with a photograph of the current president. In light of the consequences, the crime is serious.
However, the judge added that “the victims are also responsible for spreading the damage by investing excessively in the thought of obtaining high profits in a short time.”
The South Korean crypto regulation is undergoing changes. The country’s top financial regulator, the Financial Services Agency, has said that it will tighten oversight of the industry in compliance with the standards set by the Financial Action Task Force (FATF). In June, Yonhap News reported that the number of crypto exchanges in South Korea had been rising, noting that the number of local crypto exchanges stood at 205. The government introduced the real-name system in January last year, effectively banning the use of anonymous bank accounts in crypto transactions in an effort to prevent money laundering and other illegal activities. However, banks have only been providing the real-name account service to the country’s top four crypto exchanges so far.
Democratic Party Representative Je Youn-kyung has proposed a bill to tighten online security rules for all cryptocurrency exchanges, but that bill is still pending in the National Assembly along with a number of other crypto-related bills. Meanwhile, a South Korean presidential committee is pushing for the government to establish the legal status for cryptocurrency for the country to stay competitive globally.
What do you think of Coinup’s scheme and the prison sentences the executives and their accomplices received? Let us know in the comments section below.
Images courtesy of Shutterstock, Hankyoreh, and IMBC.
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