[Square] What Does 'Virtual Currency' Exist For?

Sangjun Han, Attorney at Law, Daegun Law Firm

In 2017, a cryptocurrency frenzy broke out. Everyone was investing seed money in cryptocurrencies including Bitcoin, and cryptocurrency exchanges, which resembled gambling halls with no upper or lower price limits, saw daily trading volumes worth trillions or tens of trillions of won. Trading was possible 24/7, 365 days a year, and it was not difficult to find cryptocurrency assets that could rise more than 100% in a single day without any price limits. Unlike stocks, capital market laws did not apply, and acts of receiving investments from the general public in cryptocurrencies like Bitcoin and Ethereum were difficult to classify as 'funds' reception, making it hard to punish such acts as illegal fundraising.

Almost four full years have passed since then, but not much has changed. Although regulatory laws related to cryptocurrencies such as the 'Special Act on Reporting and Using Specified Financial Transaction Information' (commonly called the 'Special Financial Transactions Act') and 'Industry-specific Acts' have been introduced, those handling cases on the ground often wonder, "What really matters?" because there is no content addressing the truly important and necessary aspects.

Meanwhile, in Teheran-ro, the holy land of multi-level marketing (MLM) in South Korea, Ponzi schemes using cryptocurrencies continue unabated. Fraudsters who used to run financial MLM scams and accept investments via bank transfers or cash have found cryptocurrencies, which can evade regulations related to illegal fundraising, and have been brazenly conducting Ponzi schemes as if they had wings. They have made and continue to make large sums of money by selling cryptocurrencies through MLM methods or by receiving investments. The fact that they are making money means that someone else is suffering significant losses. The popularity of Ponzi schemes using cryptocurrencies has varied over time: from 2017 to 2018, scams involving cryptocurrency sales and purchase agency methods were prevalent; in 2019, Ponzi schemes using cryptocurrency payment systems like PAY types were common; and in 2020, scams involving staking (like savings), mining investments, and 300% profit-guaranteed circular marketing were in vogue. All these types of scams originated from the MLM operators on Teheran-ro.

The author has been handling cryptocurrency-related cases since 2017. Most of these cases involved representing victims of the aforementioned Ponzi scams and filing complaints. However, in many cases involving cryptocurrency fraud, prosecutors and police investigators had little to no experience handling such cases and often did not fully understand the cases themselves. As a result, many complaints related to cryptocurrency fraud and illegal fundraising include a separate section titled 'Before We Begin.' This section provides explanations to help understand the terminology and transaction paths involved in cryptocurrency cases, serving as an effort to avoid the implicit rule of 'no understanding, no prosecution.'

Despite cryptocurrency fraud and illegal fundraising running rampant for so long, there is still no dedicated department or investigation manual for these cases. The author has often wondered why this is the case and has made suggestions, but the reality is that no improvements have been made yet. Among investigators, cryptocurrency-related cases are considered 'difficult' and 'undesirable' burdensome cases, and the hardships experienced as a lawyer handling these cases are truly indescribable.

Why do cryptocurrencies exist? Sometimes it is questioned whether they exist because they must inevitably be combined with blockchain technology, or if they merely serve as a means for MLM fraudsters to evade punishment and conceal criminal proceeds. Cryptocurrency regulations are still in their infancy, and there is a long way to go. The author worries about what kind of Ponzi scheme might become popular next.

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