Investors in South Korea’s booming cryptocurrency market are facing a digital storm after shocking revelations from financial regulators. According to a joint study by the Financial Supervisory Service (FSS) and the Korea Financial Intelligence Unit (FIU), as many as 70% of closed cryptocurrency exchanges neglected customers and failed to return invested funds.
Hidden Dangers of Lesser-Known Coins
The report paints a grim picture of industry practices. Many of these non-existent exchanges did not even warn users before pulling the plug, leaving users scrambling to recoup their investments. Even where some form of notice has been given, the evacuation process has been described as an ‘extreme inconvenience’ due to the lack of staff to deal with the potentially overwhelming number of claims.
It was found that 7 out of 10 domestic cryptocurrency exchanges do not return money to investors when they close or cease operations. (Hankook Ilbo) https://t.co/ws2wtzd2qu
— Financial Services Commission – Financial Services Commission of Korea (@FSC_KOREA) June 7, 2024
A stern warning to CEOs
The Financial Supervisory Service is working hard to strengthen trust in the digital asset market. They pledged to work closely with other financial watchdogs to develop stricter regulations for the closure of financial companies, especially cryptocurrency exchanges. They also issued a stern warning to CEOs of digital asset service providers, reminding them to comply with the Crypto Asset Investor Protection Act, which is scheduled to come into effect in July.
While the potential for high returns is undeniable, the risks associated with this largely unregulated market are becoming increasingly evident. While the FSS struggles to create a regulatory noose, cryptocurrency investors in South Korea would be wise to tread cautiously. Otherwise, you risk getting caught up in the next digital seizure.
Police arrested a Korean scammer.
Adding to the confusion, South Korean law enforcement recently arrested 19 people involved in a fraudulent “cryptocurrency reading room” scam that defrauded more than 300 investors out of $19 million. Operating on platforms such as Telegram, the gang posed as cryptocurrency experts and lured victims with promising information and fake guarantees.
They used fake apps linked to fake exchanges to lure victims in to make initial profits, then charged them rigged ‘withdrawal fees’ and blocked their communications. The investigation uncovered a shocking recruitment tactic called ‘pig slaughter’, where victims were promised jobs in Myanmar but were forced to commit fraud upon arrival.
Featured image from The Korea Herald, chart from TradingView