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Several executives from the South Korean cryptocurrency exchange CoinUp, including its president, were arrested on charges of fraud that amount to nearly $400 million. Local media outlets report that nine of the company’s executives were arrested on Nov 11 after an extensive investigation that began in 2018.
Local media outlet Yonhap reports that the president of the South Korean CoinUp cryptocurrency exchange, along with eight other executives have been jailed following a lengthy investigation and trial that concluded with the charge that they had defrauded investors of 400 million South Korean won (around $386 million). Those arrested include Kang Seok-Jung, the president of the company, who was sentenced to 16 years in prison. Others arrested include the company’s Chief Financial Officers (CFO) and vice presidents.
CoinUp had told investors that they would receive a 200% return on investments in four-to-ten weeks if they invest in packaged products. The officials had gone to great lengths to make CoinUp appear to be a legitimate organization and mislead investors, including displaying fake photos.
The court was harsh in its statement, saying that the fraud was calculated, terming it “deceptive, organized and precise.”
“They used the social interest in cryptocurrency to collect money from many victims through unclear coins. We also used blockages and even published composite photos as if the current president and Kang were taken together. Mr. Kang is the representative who actually operated the CoinUp, and he was the top person who led the crime by setting up the allowance system and planning the coin products.”
South Korea is considered a hotbed for cryptocurrency and blockchain products, with a sizable amount of trading and investments originating from the country. South Korean authorities have cracked down on the cryptocurrency space to limit fraudulent Initial Coin Offerings (ICOs), money laundering, and other financial crimes. In 2017, South Korea banned ICOs, which governmental bodies deemed a high-risk activity.
On the other hand, recent reports indicate that the South Korean Presidential Committee on the Fourth Industrial Revolution is pushing for more friendly regulation, which would encourage innovation and entrepreneurship. The committee’s chairman stated that the country needed to legalize digital assets, with appropriate measures taken to prevent crime and misuse.
With the era of the scam ICOs largely in the past, governments are still coming to grips with the idea of regulating cryptocurrencies and related businesses thoughtfully. Some countries, like China, appear to be on the verge of forming complete regulation while others, like India, continue to show reservations.
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