The scams in the crypto sector have become a relatively popular phenomenon. The number is increasing daily, alarming investors, regulators, and industry participants.
South Korea, one of the most technically advanced Asian nations, has provided ample space for growth of the digital assets sector. However, while the citizens have shown amiable interest in digital assets, the regulators have seemed to be cautious of the exchanges.
In a recent revelation, it has been found that the Korean authorities have intended to tighten their control over the digital asset space.
According to sources, two high-ranking executives, Mr. Yang and Mr. Oh, who were associated with the fraudulent crypto exchange V Global, have been sentenced to eight years and three years of prison, respectively. Reportedly, the executives had their involvement in defrauding investors with fraud schemes and offers.
The crypto exchange, i.e., V Global, tried to lure investors by promising 300% investment returns. It operated between July 2020 and April 2021 and mandated new users to sign-up by creating their accounts. Then they had to initially deposit approximately 6 million ($4,709.7) Korean won with a supposedly guaranteed return of 18 million won ($14,129.28).
During its one year of operation, the exchange had managed to accumulate over 50,000 investors majorly by promising users 12 million won ($9,419.53) in commission similar to a pyramid scheme. The investigations have been going on for a while, and various exchange members have been arrested.
In February, seven executives of the exchange were prisoned, and that also included the former chief executive officer (CEO). Lee Byung-gul, the CEO, has been sentenced to twenty-two years of prison. Currently, numerous employees are under investigation for violating the Act on Regulation of Similar Reception, fraud, and violation of the Door-to-Door Sales Act.
The Door-to-Door Sales Act is a Federal Trade Commission (FTC) rule that requires a seller, in any sale of consumer goods or services in excess of $25, to comply with certain notice requirements if any portion of the transaction takes place at a location other than the seller’s place of business.
A local report quoted the judge from the 12th criminal division of the Suwon District Court accusing the employees of the exchange of having interfered with the investigation and tampered with the evidence. The report stated:
“The defendants only trusted the V Global management team, evaded responsibility, and once the investigation began, they destroyed evidence and interfered with the investigation. The defendants acknowledged and reflected on the facts themselves, and many of the victims reinvested the proceeds from their existing investments, so the actual amount of damage was less than the legally defrauded amount.”
As per the sources, the estimated victim count stands somewhere near 52,000. The law firm representing the exchange’s investors revealed that most victims were middle-aged or senior citizens who wanted a stable life after retirement. They invested in the scheme in pursuit of comfortable returns to fulfill their retirement needs. Unfortunately, one victim has been reported to have also committed suicide after being scammed. The prosecutor said:
“Most victims were middle-aged or senior citizens who dreamed of a stable life after retirement.”
The frauds targeting seniors over 60 have increased over the past months. Per the FBI’s 2021 Elder Fraud Report, over $1.7 billion has been lost in fraud targeting senior citizens, marking a 74% increase compared to 2020.
Simultaneously, the mentioned group had lost over $239 million last year to investment schemes alone, mainly on the get-rich-quick scams involving digital assets or cryptocurrencies. Crypto scams among the elderly have also become common, given their lesser awareness of the subject.
The Korean authorities have been skeptical of the crypto exchanges since the collapse of Terra earlier this year. Todayq News reported that a number of hedge funds and exchanges experienced overexposure as a result of TerraUSD’s sudden dissociation from its U.S. dollar peg in May, which had a ripple effect over the whole industry. The same month, some Luna (LUNA) investors from South Korea filed a complaint against Terraform Labs and co-founder Do Kwon, accusing them of fraud and breaking regional securities regulations.