Korean man wins 7 years with $311 million crypto scheme scam

Among the indications of increasing regulatory scrutiny within South Korea, the Court of Appeals served a strict seven-year prison sentence only for men identified only as HAHM convicted of running a fraudulent cryptocurrency investment scheme.

As reported by Hankyoreh, the sentence significantly increased HAHM’s original five-year prison sentence, highlighting the seriousness of illegal fundraising activities, whether or not crypto or cash is involved.

Here’s how this scheme works: Between February and July 2023, HAHM and partners held investment seminars nationwide. They invited attendees with a promise that is difficult to resist – guaranteeing main protection and appearing like a daily return of 1% to 1.38%. To get involved, investors had to use certain payment apps linked to cryptocurrency that the organizers were promoting.

Related: South Korea will accelerate its crypto regulations as US policies change

The court found this to be not just a tactic. HAHM’s activities included around 140,000 transactions, and illegally raised about 446.7 billion wins (approximately $311 million) from the public. Importantly, the Court of Appeals said these cases were counted as illegal deposits under South Korea law.

This decision is important as it overturned a lower court’s decision. That earlier decision acquitted HAHM at several fees by dealing with crypto assets in a way different from cash, based on old legal opinions. The appeals court’s stance reveals that rules against illegal funding will be firmly applied to the Korean crypto space, as they close their potential loopholes.

Meanwhile, the founder of Terraform Labs faces major US fraud charges

The crackdown is not limited to local schemes. In a prominent case that has been affected worldwide, US federal authorities are pursuing Korean crypto entrepreneur Do Kwon. They accused him of adjusting a multi-billion dollar scam related to the dramatic collapse of his company, Terraform Labs. Kwon, who was handed over from Montenegro late last year, pleaded not guilty on December 31 to serious charges, including securities and wire fraud.

The prosecutor draws a picture of a deliberate deception. They claim that Kwon mistakenly sells Terraform digital tokens, including Terrausd, and “Stablecoins” are firmly pinned to assets like the US dollar. However, the prosecutors argue that Kwon knew that the algorithms that underpin these tokens could not actually maintain the value they were promised.

Related: Terraform Labs co-founder Do Kwon extradition approved by Montenegro Supreme Court

The allegations go further, suggesting that Kwon actively manipulates prices through secret transactions with trading companies and uses fake blockchain transactions to create a sense of false liquidity and demand for his products.