A new joint South Korean police-government-regulator crackdown on crypto-related fraud and multi-level marketing (MLM) scammers will be complete “by the end of June,” authorities declared, as Seoul moves to stamp out counterfeit and illegal crypto operators.
According to Seoul Kyungjae and the Segye Ilbo, several vice ministers met the heads of financial regulators and police officials on April 19 – their second meeting in the space of a week – for crisis discussions. The parties vowed to establish a crackdown that would allow complete results in the next ten weeks.
Extensive reports of crypto exchanges closing and failing to return customer funds promptly in the wake of new regulations have been combined 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 related to MLM scams, centering around bogus exchanges or tokens – like the OneCoin scam 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.
Numerous 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 expressly 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, rallies of more than five people have been outlawed.
At least one of the most extensive virus “super-spreader” events last year was linked to an illegal meeting of this sort. The government claims they are continuing – even though 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 the actual crypto crime.
Simultaneously, 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 several subunits devoted to tackling different 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 seek 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.
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