A new joint South Korean police-government-regulator crackdown on crypto-related fraud and multi-level marketing (MLM) fraudsters will be complete “by the end of June,” authorities stated, as Seoul moves to stamp out bogus and illicit crypto operators.
Per Seoul Kyungjae and the Segye Ilbo, a number of vice ministers met the heads of financial regulators and police officials on April 19 – their second meeting in the space of a week – for crunch talks. The parties vowed to enact a crackdown that they said would yield comprehensive results in the next 10 weeks.
Widespread reports of crypto exchanges closing and failing to return customer funds in a timely manner in the wake of new regulations have been compounded by public outcry over “crypto investor” meetups.
Although some of these meetups have been linked to bona fide ventures like mining pools, the majority appear linked to MLM scams, centering around bogus exchanges or tokens – like the OneCoin scam – that do not even operate on blockchain networks. In most cases, these involve recruiting members to move higher up a pyramid, with lucrative rewards offered to individuals recruiting large numbers of new members.
A large number of such fraudsters have been arrested and successfully prosecuted – with one notorious ring’s mastermind this week sentenced to six years behind bars.
But the government is particularly concerned that many “crypto” MLM meetups have been meeting indoors and in-person in large groups, flaunting coronavirus pandemic regulations. In most parts of the country, meetups of more than five people have been outlawed.
At least one of the biggest virus “super-spreader” events of last year was linked to an illegal meeting of this sort, and the government claims they are continuing – despite the fact that cases are continuing to rise around the country. Most media outlets are now reporting that the country is facing a “fourth wave” of infections.
The police say they will be using crypto “tracking software” to help them catch fraudsters in cases linked to genuine crypto crime, while the Fair Trade Commission has announced that it will scrutinize contracts being offered by operators to ensure that they do not contain clauses that are disadvantageous to investors.
The ministries, regulators, and police have created a number of subunits devoted to tackling different forms of crypto fraud-related crimes.
However, critics state that the “legal basis” for the crackdown is “weak” and that its “standards are not specific.”
Seoul is also pushing banks to limit international fiat remittances to China, over fears some investors are seeking to take advantage of the kimchi premium by buying crypto using fiat KRW or USD from vendors in China and selling their tokens on local exchanges.