South Korea to Establish Permanent Crypto Investigation Unit

Local news sources indicate that South Korea is implementing significant actions to address the rise in cryptocurrency-related offenses and fraud by transitioning its temporary virtual asset investigative unit into a permanent establishment.

This initiative arises in the context of an increase in suspicious transaction reports from cryptocurrency firms. Last year, over 16,000 reports were documented, marking a 49% rise compared to the prior year.

South Korea Considers Formalizing Crypto Crime Investigation Unit

As per a local report, South Korea is contemplating the promotion of its temporary crypto crime investigative unit, known as the Virtual Asset Joint Investigation Team, to a permanent department.

In light of an ongoing trial involving an altcoin issuer in South Korea who was arrested on fraud allegations, the Ministry of Justice and the prosecution are advocating for the formal establishment of the Virtual Asset Joint Investigation Team to bolster investigative capabilities. Importantly, discussions between the Justice Ministry and the Ministry of the Interior and Safety are set to begin in early May regarding the unit’s elevation to an official department.

Currently functioning under the Seoul Southern District Prosecutor’s Office as a temporary entity, the unit is at risk of being disbanded. The report suggests that upgrading its status is expected to improve operational efficiency through the appointment of additional prosecutors and better budget management.

The Virtual Asset Joint Investigation Team, established on July 26, 2023, is responsible for probing coin-related offenses. It consists of approximately 30 investigative specialists from seven different organizations, including the prosecution and financial authorities. This team works in conjunction with various key entities in investigations related to virtual asset crimes.

Despite the notable advancements made by the unit, worries regarding its temporary nature could result in its potential dissolution. Previous instances, such as the disbandment of the Southern District Prosecutors’ Office’s Securities Crime Joint Investigation Team in January 2020, underscore the necessity for a formalized investigative body to ensure effective communication and collaboration with relevant organizations.

South Korea Grapples with Surge in Crypto-Related Crimes

South Korea has experienced a significant rise in cryptocurrency-related criminal activities, as reported by the Financial Intelligence Unit of South Korea.

A February report from South Korea’s Financial Intelligence Unit revealed that local cryptocurrency firms reported 16,076 suspicious transactions in 2023, a 49% increase from 2022. Over the five-year period from 2017 to 2022, the financial losses caused by virtual asset-related crimes surpassed 5.3 trillion won.

South Korea is poised to implement stricter regulations for token listings on exchanges, including the prohibition of tokens that have been compromised.

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To protect investors, South Korea plans to enact its first comprehensive cryptocurrency regulation on July 19. This new regulation introduces harsher criminal penalties for market manipulation within the cryptocurrency sector. It includes the potential for life sentences in certain circumstances or substantial fines for offenders involved in such illicit activities.

Mr. Han, the CEO of a virtual asset issuer, has been accused of colluding with a professional market manipulation firm named ‘John Berkim’ to allegedly defraud investors of 21.6 billion won. He is currently facing trial after being handed over on the 5th. In December 2020, Mr. Han launched and listed ‘Grape’, a coin lacking any utility. The coin reportedly caused considerable losses to many investors through strategies such as market manipulation.

The Grape coin fraud case exemplifies the growing number of virtual asset crimes. As virtual assets become increasingly popular as a new investment option, related offenses and the scale of damage are escalating swiftly.

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