In a recent development highlighting the increasing regulatory scrutiny in South Korea, a man known only as Hahm has been handed a rigorous seven-year prison sentence for his involvement in a fraudulent cryptocurrency investment scheme. This sentence, which was increased from an original five-year term, underscores the severity of illegal fundraising activities, regardless of the form of currency involved.
The scheme orchestrated by Hahm and his partner operated between February and July 2023, during which they conducted investment seminars nationwide. Their enticing promises of guaranteed principal protection and daily returns ranging from 1% to 1.38% attracted investors who were required to use a specific payment app linked to a cryptocurrency promoted by the organizers.
Related: South Korea Accelerates Crypto Regulations as U.S. Policies Shift
An investigation revealed the extensive scale of the operation, with approximately 140,000 transactions conducted illegally, resulting in the fraudulent raising of approximately 446.7 billion won (equivalent to around $311 million) from the public. The appeals court deemed these actions as illegal deposit-taking under South Korean law, emphasizing the gravity of the offense.
This landmark decision marks a departure from a previous ruling by a lower court that had acquitted Hahm on some charges by treating crypto assets differently from traditional currency. The appeals court’s stance now clarifies that regulations against illicit fundraising apply equally to the cryptocurrency sector in South Korea.
Meanwhile, Terraform Labs Founder Faces Major US Fraud Charges
The crackdown on fraudulent activities extends beyond domestic schemes, as evidenced by the case of Do Kwon, the South Korean crypto entrepreneur and founder of Terraform Labs. U.S. federal authorities have leveled serious charges against Kwon for allegedly orchestrating a substantial fraud scheme that led to the collapse of his company, Terraform Labs. Kwon, who was extradited from Montenegro, entered a plea of not guilty on December 31 to charges including securities and wire fraud.
Prosecutors allege that Kwon engaged in deliberate deception by falsely marketing Terraform’s digital tokens, such as TerraUSD, as stablecoins pegged to assets like the U.S. dollar, despite knowing that the underlying algorithms could not sustain their promised value.
Related: Terraform Labs Co-founder Do Kwon Extradition Approved by Montenegro Supreme Court
The accusations extend to claims that Kwon manipulated prices through undisclosed agreements with trading firms and employed fake blockchain transactions to artificially inflate liquidity and demand for his products.
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