[Exclusive] Supreme Court Expands Application of Telecommunications Fraud Compensation Act... Prospects for Relief of Coin Victims [Coin Fraud Republic]

Application of the Act on the Refund of Telecommunications Fraud Damages to Gift HTS Fraud
Expectations for Relief from Coin Fraud Damages Based on Supreme Court Precedent

The full bench ruling is being held at the Supreme Court courtroom of the Supreme Court in Seocho-gu, Seoul. Photo by Yonhap News

The Supreme Court has issued a ruling expanding the types of telecommunication financial fraud under the Act on the Refund of Damages from Telecommunication Fraud. The current legal provisions only specify voice phishing as a crime under telecommunication financial fraud, leading to criticism that the legislative purpose of "crime prevention and victim recovery" has been diminished. With this ruling, it is expected that the scope will broaden to include areas such as initial public offerings and virtual assets (coins) in the future.

According to a comprehensive report by Asia Economy on the 3rd, the Supreme Court's First Division (Presiding Justice Shin Sook-hee) confirmed a sentence of 2 years and 2 months imprisonment and ordered the confiscation of criminal proceeds amounting to 1,134,474,160,000 KRW in the appeal trial of A, a member of a fraudulent futures trading exchange organization.

Previously, A was prosecuted in a criminal trial for participating in a fraudulent exchange organization that used a fake Home Trading System (HTS) from 2021 until last year. The introduced HTS program deceived victims by claiming that following the "futures investment" leads to large profits, but since it was not linked to any actual securities firms, the money transferred by victims went directly into the organization's crime accounts. The total damage from crimes involving A reached 19.5 billion KRW, and it was investigated that A personally pocketed more than 4 million KRW monthly for 14 months.

The first trial found A guilty of fraud and violations of the Capital Markets Act but acquitted him of violating the Act on the Refund of Damages from Telecommunication Fraud. The first trial court stated, "This case involves acts not included in the telecommunication financial fraud under the Act on the Refund of Damages from Telecommunication Fraud, so the Act on the Forfeiture of Corrupt Property does not apply," and rejected the prosecutor's request to confiscate A's criminal proceeds of approximately 1,134,474,000 KRW.

Article 2, Clause 2, proviso of the Act on the Refund of Damages from Telecommunication Fraud states that "acts disguised as supply of goods or provision of services cannot be regarded as telecommunication financial fraud," and the first trial court judged that A's actions could not be punished under this law.

The higher courts took a different view. The second trial court ruled, "The exclusion in the proviso should be interpreted as only applying to acts where 'the supply of goods or provision of services directly causes the acquisition of property benefits in a quid pro quo relationship,'" and "embezzlement of funds not in a service provision and quid pro quo relationship, as in this case, constitutes 'telecommunication financial fraud.'" The Supreme Court also held that "there is no error in the lower court's interpretation of the law regarding 'telecommunication financial fraud' and confiscation under the Act on the Refund of Damages from Telecommunication Fraud," affirming the second trial court's decision as correct.