2024

<p style="text-align: justify">A court in South Korea has sentenced a man to two and a half years in prison for laundering proceeds from a fake coin investment scam, marking the first time the new Virtual Asset User Protection Act was used in a fraud case not referred by financial regulators.</p>
<h2 id="landmark-case-in-crypto-regulation-enforcement">Landmark case in crypto regulation enforcement</h2>
<p style="text-align: justify">The Goyang branch of the Uijeongbu District Court found that a group of scammers operated a fraudulent investment platform, offering non-existent digital tokens to unsuspecting investors. Promoters claimed that the tokens were available at a discount and would generate substantial profits when listed on a cryptocurrency exchange. However, there was no intention to deliver any actual assets to buyers.</p>
<p style="text-align: justify">A man identified as “A” handled the money laundering aspects of the operation. He registered as a gift-certificate dealer, a status that allowed him to manage business bank accounts. Between late December 2024 and February 2025, “A” received approximately 501 million won (around $345,000) from fourteen victims across 76 separate transfers. After receiving the funds, he transferred the proceeds to others higher in the scheme, often converting it into cash or vouchers. For his role, he reportedly earned between 150,000 and 200,000 won per day, amounting to $103 to $138 daily.</p>
<p style="text-align: justify">In July, the Goyang court sentenced “A” to 2.5 years in prison. He appealed the verdict, but the appellate court rejected his case in October, making the sentence definitive.</p>
<p style="text-align: justify">The court convicted “A” under Article 10, paragraph 4, item 1 of the Virtual Asset User Protection Act, which became effective in July 2024. This provision prohibits fraudulent and deceptive activities related to digital assets. The ruling also found him guilty of standard fraud and hiding criminal proceeds.</p>
<p style="text-align: justify">During the trial, “A” acknowledged laundering funds but argued that he was unaware of the full details of the scam and should not be prosecuted under the crypto law. Judges disagreed, concluding that he knew the illicit source of the funds and that his role in laundering was critical to the operation. The court emphasized that acting solely as a launderer did not absolve him of responsibility.</p>
<blockquote>
 <p>The court established that “A” was fully aware the funds were criminal proceeds and judged his laundering activities to be central to the fraudulent scheme.</p>
</blockquote>
<p style="text-align: justify">This case is the first example of the Virtual Asset User Protection Act being used in a criminal conviction without a formal referral by either the Financial Services Commission (FSC) or the Financial Supervisory Service (FSS), the main financial regulators in South Korea.</p>
<p style="text-align: justify;background: linear-gradient(135deg,#ffffff 0%,#fffdf9 100%);border:1px solid #f1e4d8;border-left:4px solid #F69434;padding:14px 16px;border-radius:12px;color:#1e293b;font-size:15px;line-height:1.7">Mini dictionary: Virtual Asset User Protection Act – A law implemented in South Korea in July 2024 designed to combat fraud and manipulation in the cryptocurrency sector, granting broader powers to law enforcement and imposing stricter protections for digital asset investors.</p>
<h2 id="earlier-convictions-under-the-crypto-law">Earlier convictions under the crypto law</h2>
<p style="text-align: justify">The country’s first-ever conviction under the Virtual Asset User Protection Act occurred on February 4, 2026. The Seoul Southern District Court sentenced Jong-hwan Lee, CEO of a digital asset management company, to three years in prison for orchestrating wash trading involving the ACE token, a practice where a trader artificially inflates trading volume by conducting trades with themselves.</p>
<blockquote>
 <p>Lee was fined and ordered to forfeit illicit profits, while a co-defendant, Min-cheol Kang, received a suspended two-year prison sentence.</p>
</blockquote>
<p style="text-align: justify">Lee, in addition to the prison sentence, was fined and required to pay 500 million won (approximately $344,000). The court also ordered him to surrender 846 million won (about $583,000) gained from illicit trading activity. Charges linked to 7.1 billion won (roughly $4.9 million) were dismissed due to insufficient evidence, but prosecutors have appealed, seeking to recover those funds as well.</p>
<p style="text-align: justify">Financial authorities initially treated Lee’s case as one of market manipulation before handing it to prosecutors through a fast-track process.</p>
<table style="border:1px solid #f1e4d8;padding:8px">
 <thead>
  <tr>
   <th>Case</th>
   <th>Defendant</th>
   <th>Prison Sentence</th>
   <th>Fine/Forfeiture</th>
   <th>Charges</th>
  </tr>
 </thead>
 <tbody>
  <tr>
   <td>Fake coin scam (2024-2025)</td>
   <td>“A”</td>
   <td>2.5 years</td>
   <td>—</td>
   <td>Fraud, laundering, crypto law violation</td>
  </tr>
  <tr>
   <td>ACE token wash trading (2026)</td>
   <td>Jong-hwan Lee</td>
   <td>3 years</td>
   <td>1.35 billion won ($927,000)</td>
   <td>Wash trading, crypto law violation</td>
  </tr>
 </tbody>
</table>
<h2 id="enforcement-and-ongoing-investigations">Enforcement and ongoing investigations</h2>
<p style="text-align: justify">South Korea’s financial regulators have significantly increased oversight of digital asset crimes. The FSC and FSS have reportedly completed around 40 investigations, referring more than 30 cases—implicating 25 suspects—to prosecutors. Most cases centered on short-term market manipulation and saw average proceeds of 1.4 billion won (roughly $960,000) per case.</p>
<p style="text-align: justify">Meanwhile, police are focusing efforts on dismantling fake coin and crypto-related money laundering operations in several regions.</p>
<p style="text-align: justify">These developments signal a shift in South Korea’s approach to cryptocurrency crime, leveraging expanded legal tools to pursue both primary offenders and those aiding in the movement of illicit funds.</p>
<p>The post <a href="https://en.coin-turk.com/south-korea-hands-first-non-regulator-crypto-fraud-conviction-under-new-law/" rel="noopener noreferrer nofollow">South Korea hands first non-regulator crypto fraud conviction under new law</a> appeared first on <a href="https://en.coin-turk.com" rel="noopener noreferrer nofollow">COINTURK NEWS</a>.</p>

South Korea hands first non-regulator crypto fraud conviction under new law

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