Supreme Court Confirms Prison Sentences for Former Coinone Executives in 2.7 Billion Won Stock Bribery Case

Accused of Obstructing Business at the Exchange Confirmed

Former executives of the virtual asset exchange Coinone, who were indicted for receiving large sums of illegal 'listing fees' in exchange for virtual asset listings, have been sentenced to prison terms.

The Supreme Court's 2nd Division (Presiding Justice Kim Sang-hwan) dismissed the appeals of former director Jeon (42) and former listing team leader Kim (32), who were indicted on charges of embezzlement and obstruction of business. The court upheld the original sentences of 4 years imprisonment for Jeon and 3 years and 6 months imprisonment for Kim. The order to confiscate approximately 1.9368 billion KRW from Jeon and about 883 million KRW from Kim was also confirmed.

Supreme Court, Seocho-dong, Seoul.

The court stated the reason for dismissing the appeals, saying, "There was no error in the original judgment that would affect the verdict, such as failing to conduct necessary hearings, violating the rules of logic and experience beyond the limits of free evaluation of evidence, or misunderstanding the method of calculating confiscation amounts, the conspiracy relationship, and the legal principles concerning embezzlement and obstruction of business."

Jeon, who served as Coinone's Chief Growth Officer (CGO) overseeing virtual asset listing reviews, and Kim, a mid-level manager responsible for listing operations, were prosecuted for receiving nearly 2 billion KRW and 1 billion KRW respectively in coins and cash from brokers over approximately 2 years and 8 months from 2019 to 2022 in exchange for listing several domestic coins, and for obstructing Coinone's listing operations.

Jeon is accused of receiving 0.9396 Bitcoin (worth about 7.1 million KRW at the time) transferred from broker A in March 2020 as a token of gratitude for facilitating the listing of coin B, which A had requested, along with a request to continue assisting with listings of coins recommended by A. Up to March 2021, Jeon allegedly received Tether and Bitcoin worth about 218.85 million KRW from A in 13 separate transactions. He is also accused of receiving 120 million KRW in cash over 12 transactions from April to November 2020.

Jeon also accepted an offer from another listing broker, C, who proposed that if coin D was listed, Jeon could receive some of the coin supply from the issuing foundation to generate profits. After coin D was actually listed, Jeon received about 46,700 Ripple coins (worth approximately 48.68 million KRW) transferred from C in February 2022, and virtual assets worth a total of about 1.6 billion KRW in Korean won value until November of the same year.

Kim is also accused of receiving coins or cash worth about 1 billion KRW in total from brokers.

Additionally, both individuals are charged with obstructing the exchange's operations by arranging contracts with MM (Market Making) firms, knowing that MM, which was conducted as liquidity provision for the listed coins, was effectively price manipulation.

The key issue was whether MM, a liquidity provision practice commonly used in the virtual asset market at the time, could be considered 'price manipulation' and thus punishable as obstruction of business against the exchange.

The first-instance court ruled that the MM firms artificially manipulated prices through large-scale wash trading beyond normal liquidity provision for the listed coins, and that Jeon and Kim were aware to some extent of the illegality of such acts, thereby establishing the crime of obstruction of business.

The first-instance court found most of the charges against the two guilty, sentencing them to 4 years and 3 years and 6 months imprisonment respectively, and ordered confiscation of the criminal proceeds they obtained. However, the court dismissed some of Kim's embezzlement charges after the prosecution withdrew the indictment during the trial.

Regarding Jeon's sentencing, the court pointed out, "The defendant held a position overseeing the listing operations of the victim company but violated his duties by accepting money and valuables from listing brokers. The number of offenses (receipts) was 41 times, and the total amount received was about 2 billion KRW, indicating a significant scale of crime."

However, the court took into account favorable factors such as "the defendant being a first-time offender, his early confession and active cooperation with the investigation, his apparent deep remorse after about six months of detention, and the fact that the confiscation and recovery of the received valuables have been completed, meaning the defendant gained almost no actual benefit."

Regarding Kim's sentencing, the court stated, "The defendant was the listing team leader of the victim company but violated his duties by accepting money and valuables from listing brokers. The number of offenses (receipts) was 36 times, and the total amount received was about 810 million KRW, indicating a significant scale of crime."

It added, "Despite multiple warnings from investigative agencies since the start of the investigation, the defendant continuously attempted to destroy evidence and shifted responsibility to co-defendants, showing no remorse, and his attitude after the crime was quite poor. The victim company has petitioned for severe punishment of the defendant due to such behavior."

Both appealed, but the appellate court upheld the same judgment.

The Supreme Court also found no issues with the lower courts' rulings.

Meanwhile, two brokers who were prosecuted for bribery (embezzlement mediation) by giving kickbacks to the two individuals had their prison sentences of 2 years and 6 months and 1 year and 6 months respectively confirmed at the appellate stage.

Although Coinone was recognized as the victim of obstruction of business by Jeon and others in this case, victims who suffered damages from Jeon and others' price manipulation acts are expected to be able to claim damages from Coinone by holding it liable under civil law for employer responsibility or for tort liability due to negligence in failing to take sufficient measures to prevent price manipulation.