Investors in South Korea’s booming cryptocurrency market are facing a digital dust storm after a shocking revelation from financial regulators. A joint study by the Financial Surveillance Service (FSS) and the Korea Financial Intelligence Unit (CRF) found that 70% of closed crypto exchanges left their customers hanging, failing to return invested funds.
The hidden risks of lesser-known coins
The painted report a grim picture of industry practices. Many of these defunct exchanges didn’t even bother to warn users before pulling the plug, leaving them scrambling to save their investments. Even in cases where some form of notice was issued, the opt-out process was described as an “extreme inconvenience” with a small team tasked with handling a potentially overwhelming number of claims.
Seven out of ten cryptocurrency exchanges in Korea fail to return investors’ money when they close or suspend operations, according to financial authorities on Friday. (Korea Times) https://t.co/ws2wtzd2qu
– Financial Services Commission – FSC Korea (@FSC_Korea) June 7, 2024
Severe warning to CEOs
The FSS strives to build trust in the digital asset market. They pledged to work closely with other financial watchdogs to develop stricter regulations for shutting down financial companies, particularly crypto exchanges. They also issued a stern warning to CEOs of digital asset service providers, reminding them to comply with the upcoming Virtual Asset Investor Protection Act, which is expected to take effect in July.
While the potential for high returns is undeniable, the risks associated with a largely unregulated market are becoming increasingly evident. As the FSS works to craft a regulatory lasso, Korean crypto investors would do well to tread carefully or risk getting caught in the next digital stampede.
Police arrest South Korean scammers
Adding to the chaos, South Korean law enforcement recently arrested 19 individuals linked to a deceptive network. “crypto reading room” scam that defrauded more than 300 investors of $19 million. Operating on platforms like Telegram, the gang poses as crypto experts to lure victims with promising tips and fake endorsements.
They used fake apps linked to fake exchanges, luring victims with initial winnings before imposing fake “withdrawal fees” and cutting off communication. The investigation also revealed a disturbing recruitment tactic called “pig butchery,” whereby victims were promised jobs in Myanmar but were forced to engage in the fraudulent operation upon arrival.
Featured image from Korea Herald, chart from TradingView
