South Korean authorities are investigating a major crypto scam involving 215 perpetrators that plunged more than 15,000 people into financial doldrums.
At the center of this investigation is a popular YouTuber with nearly 620,000 subscribers, according to a local news report on November 13, 2024.
Alongside a network of quasi-investment consulting firms, the YouTuber duped victims out of a whopping 325 billion won ($232 million).
South Korean police arrest 215 people in alleged $228 million crypto scam pic.twitter.com/7M3coZGQ8C
-Reuters (@Reuters) November 13, 2024
Vulnerable investors promised 20x returns
South Korea’s Gyeonggi Provincial Police Agency 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 police, the project ran from December 2021 to March 2023. The suspects lured investors with exaggerated promises. This included claims of returns “20 times the principal.” Furthermore, vVictims were contacted through an aggressive campaign targeting more than 9 million phone numbers acquired through lectures and YouTube advertisements.
Reports indicate that of the coins issued, six were specifically manufactured by the group to create artificial demand and inflate prices. “These were then sold at premium rates to unsuspecting investors,” officials confirmed.
Korean authorities explained in detail that the remaining 22 coin types, while not directly issued by the group, had little value, often with minimal trading volume and little information available in Korea.
Apparently, middle-aged and older investors are most affected by this program. Many victims allegedly took extreme financial risks, including selling their homes and obtaining loans to invest in the promised assets.
One of the officials highlighted the growing sophistication of these scams, noting that “investment fraud crimes are becoming more organized and intelligent, claiming many victims.”
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YouTuber Created Holding Company to Oversee 6 Consulting Firms and 10 Sales Companies
The investigation apparently revealed a multi-layered organizational structure behind the fraud. According to police, the accused YouTuber created a holding company to oversee six consulting companies and ten sales companies.
These companies were allegedly organized into 15 specialized groups, each assigned to specific roles such as management, coin issuance, price manipulation, database provision and money laundering.
With operations strategically divided, this setup allowed the organization to present a professional facade, complete with fake business cards and fabricated corporate identities, often posing as Financial Surveillance Service officials.
This complex structure facilitated the scope and credibility of the scam. The group targeted people who had already suffered losses in their stock and coin investments. They exploited the trust of these individuals, promising recovery and compensation by investing in new coins marketed as profitable businesses.
Police have reported cases where perpetrators used fake phones and ID cards to collect sensitive information, which was then exploited to obtain additional loans under the guise of compensation for victims’ previous losses.
Officials said they “impersonated financial authorities to build trust,” saying the impostors asked for proof of personal identity in order to compensate for damages.
Record recovery efforts and police crackdown
As authorities dig deeper into the organization’s operations, efforts are underway to recover the funds. The police investigation, which began in February 2023, meticulously traced more than 1,444 accounts linked to the sale of virtual assets, detailing the complex flow of funds through various channels.
Recently, the ringleader, who initially fled to Australia via Hong Kong and Singapore, was caught with 22 Bitcoins in his possession and was seized upon arrest.
A significant victory in the recovery process includes the pre-indictment forfeiture of 47.8 billion won ($34.2 million) in assets linked to the scam. Part of the recovered amount was intercepted through account tracking and other investigative techniques.
Police now aim to maximize restitution to victims, although challenges remain as a significant portion of the funds were channeled through international channels.
Officials added: “We have requested pre-charge forfeiture and preservation of assets as we continue to identify additional recoverable funds. »
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Korean authorities step up crypto oversight
In response to growing cases of crypto-related financial crime, South Korea has introduced measures aimed at intensifying regulatory oversight of virtual assets.
Deputy Prime Minister and Minister of Economy and Finance Choi Sang-Mok confirmed that a monitoring system for virtual asset transactions will be established. launched in 2025 to regulate cross-border crypto transactions. This system will require companies to pre-register with relevant authorities and submit monthly transaction reports to the Bank of Korea.
“Since a fundamental law on virtual assets has not yet been established, it is unclear whether stablecoins traded across borders should be considered a means of payment or capital transactions ” Choi noted. Additionally, he highlighted a regulatory gap that the new oversight intends to fill.
2024 is a pivotal year for cryptoasset regulation, with Australia, the UK, Brazil and South Korea set to unveil new rules.
Notably, 70% of the countries examined are making significant adjustments to their regulatory framework.
Stay informed!
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– SALL token (@SALLtoken) November 14, 2024
In addition, the information collected will be shared between key agencies, including the Financial Intelligence Unit and the Korean Customs Service. This will be done to help prevent illegal transactions.
Further strengthening this oversight, Choi announced changes to the foreign exchange transaction law planned for mid-2025. These amendments will redefine virtual assets within the legal framework, classifying them as a separate “third type” for better enforcement.
Addressing what he called a regulatory “blind spot,” Choi stressed that South Korea needs clarity in how crypto assets are treated, especially as “exchange crimes increase in correlation with the recent increase in stablecoin listings and trading volume.”
In line with these changes, the Financial Services Commission is expected to launch a 15-member virtual assets committee in November to assess regulatory issues and propose policies to strengthen compliance across South Korea’s virtual assets sector. .
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