Coin Scam: 30s Sentenced to 5 Years Imprisonment and 1 Billion Won Fine... Court Presents 'Fraud Crime' Judgment Criteria

[Asia Economy Reporter Kim Daehyun] A court sentenced a man in his 30s to prison for investment fraud, accusing him of conducting a blockchain-based project and listing a self-issued cryptocurrency to be used therein, and presented specific criteria for establishing related fraud charges.

According to the court on the 30th, the Criminal Division 23 of the Seoul Central District Court (Presiding Judge Jo Byung-gu) recently sentenced Han Mo (33, male), who was indicted on charges including fraud under the Act on the Aggravated Punishment of Specific Economic Crimes, to five years in prison and a fine of 1 billion KRW.

Earlier, in April 2019, Han established a blockchain-based webtoon platform company and promoted that he would issue a proprietary cryptocurrency to be used as the currency circulated within the company’s project. He also claimed that listing the cryptocurrency on a major cryptocurrency exchange would yield profits exceeding tenfold.

The prosecution judged that Han collected about 2.4 billion KRW worth of Bitcoin, Ethereum, and cash from approximately 30 victims without the capability or intention to develop the platform or list the cryptocurrency.

Han was also indicted on charges of investment fraud by promising guaranteed profits through cryptocurrency price manipulation. Investigations revealed that he earned about 500 million KRW in profits, including Bitcoin, from seven victims using a so-called 'Ponzi scheme' method.

The court stated, "Virtual assets are a new financial transaction domain with high social expectations and speculative sentiment, but they are unstable due to significant information asymmetry and the lack of an established, credible trading system. Appropriate regulation is also lacking." It added, "If the entity holding issuance and trading information fails to provide accurate information and instead offers false or exaggerated information, or opportunistically exploits information asymmetry to induce investment, it can be evaluated as deception under fraud charges."

Furthermore, the court presented the following criteria for judgment: ▲ In virtual asset issuance (ICO), if the issuer’s capability or substance is unclear and technical or business capabilities and substance to promote the issuance or the underlying business are exaggerated or falsely represented (deficiencies in the issuer and whitepaper); ▲ If false or highly unlikely disclosures or announcements exaggerate market conditions or the business feasibility of the underlying project (false disclosure); ▲ If investments are induced by promising high returns through abnormal price manipulation or artificial price increases despite being practically unachievable within reasonable prediction (unfair trading inducement).

Based on this, the court judged Han’s charges as guilty, stating, "Considering the deceit that stimulated speculative sentiment in group chat rooms, the shamelessness shown to victims, the scale of the embezzled amount, and his attitude during investigations, the nature of the crime is very serious." It also criticized, "The defendant showed no remorse and committed most of the crimes during the recidivism period for similar offenses (within three years after sentence completion or exemption). The damage has hardly been recovered, and most of the embezzled funds appear to have been used in a Ponzi scheme, but there is suspicion that some embezzled money may have been concealed."

However, the court added, "Most victims also invested in a business based on new technology without thoroughly examining its substance, and pursued high returns that are difficult to obtain in a fair market, engaging in extremely high-risk investments, considering various circumstances."