Court Sentences Former Army Officer to Prison for Embezzling Large Sum Due to Cryptocurrency System Error

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] A former army officer who embezzled approximately 300 million KRW by exploiting a system error in a cryptocurrency exchange during military service has been sentenced to prison.

On the 29th, Kwon Deok-jin, Chief Judge of the Criminal Division 1 at the Seoul Eastern District Court, announced that he sentenced Reserve Army Lieutenant A, who was indicted on charges of computer fraud and obstruction of computer business, to 10 months in prison. However, he was not detained in court.

A served as a platoon leader at an army unit located in Yanggu-gun, Gangwon Province, and purchased about 280,000 B tokens, a type of cryptocurrency, between January and February 2018.

At that time, the company issuing B tokens was preparing for a listing on a Hong Kong cryptocurrency exchange in May 2018. They sold tokens to investors through a 'private sale' while prohibiting resale. Technical measures were also implemented to enforce this.

However, A heard in an investor group chat that "I tried transferring tokens stored in my virtual wallet to a Hong Kong exchange account as a test, and tokens were generated as if the transfer actually occurred. The number of tokens originally stored in the wallet did not decrease and remained the same."

Recognizing that there was a system error in the Hong Kong exchange, A conducted unauthorized token transfers the afternoon before the B token listing day. It was revealed that A created tokens worth about 290 million KRW in cash value in accounts under his and his family's names through 146 instances of unauthorized computer commands. Eventually, A was prosecuted by civilian prosecutors last year.

Judge Kwon explained the sentencing, saying, "The amount A embezzled reached about 290 million KRW, and in particular, some of the fake tokens were cashed out, withdrawing about 38 million KRW. The victim (the cryptocurrency issuing company) has not yet recovered the damages."

This content was produced with the assistance of AI translation services.