The emergence of virtual assets has altered the financial landscape, necessitating heightened efforts to prevent crimes like money laundering. The Ministry of Justice and the prosecution are supporting the formation of a Virtual Asset Joint Investigation Team by the Seoul Southern District Prosecutors’ Office to enhance investigative skills.
On April 5, Mr. Han, the CEO of a virtual asset (coin) issuer, was transferred to the trial on charges that he conspired with a professional market manipulation firm called ‘John Berkim’ to steal 21.6 billion won from investors.
Mr. Han launched and listed “Grape,” a worthless “scam” coin, in December 2020. He then employed strategies, including market manipulation, to trap many investors. “Grape coin fraud” is, however, only a little-known fact on a vast list of virtual assistant crimes.
Since virtual assets are a new investment opportunity, crimes and damages have increased. To improve investigations, the Seoul Southern District Prosecutors’ Office and the Ministry of Justice want to form the Virtual Asset Joint Investigation Team (VAJIT).
As reported by Segye Ilbo on April 28, the Ministry of Justice and the Ministry of Public Administration and Security are in the process of formalizing and enhancing the Virtual Asset Merger Department, formerly an unofficial provisional organization. Early the following month, the two ministries intend to convene to deliberate on the necessity of establishing the virtual asset joint venture formally.
The Virtual Asset Joint Investigation Team, which was formed on July 26 of last year, is the first organization with the specific mandate of conducting exhaustive investigations into crimes involving coins. Due to the critical nature of virtual asset crime investigations, collaboration with financial authorities and other organizations is imperative.
In this regard, seven organizations—the Financial Supervisory Service, Prosecutors’ Office, Financial Intelligence Unit (FIU), Korea Customs Service, National Tax Service, Korea Deposit Insurance Corporation, and Korea Exchange—form the joint investigation team tasked with conducting the inquiry.
The group comprises approximately 30 investigative specialists. Chief Prosecutor Lee Jeong-ryeol, a ‘blue belt’ certified professional prosecutor in the securities and financial domains, was the initial leader of the collaborative virtual asset team.
The prevalence of crimes involving virtual assets is on the rise. Virtual asset operators reported 16,076 suspicious transactions (STRs) to the Financial Services Commission in 2018, a 48.8 percent rise from the previous year. Compared to last year, the Financial Services Commission notified prosecutors, police, and the National Tax Service of 90% more suspected virtual asset-related crimes. Over the five-year period from 2017 to 2022, the crime-related damage to virtual assets was substantial, surpassing 5.3 trillion won.
The Virtual Asset Joint Venture detained and indicted two ‘PICA Project’ representatives in August 2018, more than 15 days after its introduction, for the ‘No. 1 cases’ PICA coin incident. Most of investors’ coins were ‘invested’ in certain individuals last February, and they stole 1.4 trillion won by false advertising.
The Virtual Asset Joint Investigation Team is making progress, but it is a transitory entity that can be dissolved at any time. In January 2020, Moon Jae-in dissolved the Southern District Prosecutors’ Office’s Securities Crime Joint Investigation Team. This made securities crime investigations difficult. Hence the Securities Crime Joint Investigation Team was reactivated under the present administration.
With the ‘Virtual Asset User Protection Act’ and the official formation of the Virtual Asset Association scheduled to take effect on July 19th and July 19th, respectively, it is anticipated that prosecutions and investigations pertaining to virtual assets will become more active.
The new legislation makes it illegal to engage in unfair trading practices involving virtual assets, such as using confidential information without disclosing it, manipulating the market, or engaging in illegal transactions. Violators can face a fine of up to twice their unfair profits or a maximum penalty of life in prison.
