On July 31, 2024, a South Korean court sentenced Jong-hwan Lee, the CEO of a local crypto asset management company, to three years in prison for manipulating cryptocurrency prices for personal gain.

The Seoul Southern District Court’s ruling came under the Virtual Asset User Protection Act, and imposed additional penalties including a fine of 500 million won (around $344,000) and the forfeiture of 846 million won ($581,900) in criminal proceeds. Remarkably, Lee was not taken into custody during the trial due to his good behavior.

Court Findings

The court found that between July 22 and October 25, 2024, Lee had manipulated trading volumes using an automated trading system, significantly inflating the daily trading activity of the ACE cryptocurrency. The trading volume surged from around 160,000 units to 2.45 million units overnight, with Lee accountable for 89% of this trading activity.

In connection to this case, Min-cheol Kang, a former employee of the firm, was sentenced to two years in prison with a three-year probation period. Although both were confirmed to have engaged in manipulative practices, the court acquitted them partially regarding the specific amount of 7.1 billion won due to lack of evidence.

This case represents the first significant law enforcement action under South Korea’s new cryptocurrency regulations, enacted in July 2024.

Broader Legal Issues in South Korea

While focusing on punishing crypto market misconduct, separate legal branches face challenges related to the management of digital assets. In January 2024, South Korean prosecutors launched an investigation into the mysterious disappearance of a substantial amount of Bitcoin that had been seized for criminal cases.

This incident was discovered during a routine inspection at the Gwangju District Prosecutors’ Office, as they reviewed access for confiscated assets. Reports indicate the loss might be linked to a phishing attack, highlighting ongoing vulnerabilities in managing cryptocurrencies.