Prosecutors Arrest 4 for 'Coin Listing Corruption'... "Structural Issues in the Trading Market"

The prosecution revealed that during the investigation of two former Coinone listing officers and two listing brokers recently detained, they identified structural problems in the domestic coin (cryptocurrency) market.

[Image source=Yonhap News]

On the 11th, the Virtual Asset Corruption Investigation Team of the Financial Investigation Division 1 at Seoul Southern District Prosecutors' Office (Chief Prosecutor Lee Seung-hyung) announced that they had detained two Coinone employees and two listing brokers on charges of accepting bribes and facilitating coin listings.

Listing broker Mr. Go was indicted on charges of mediation of breach of trust on the 7th of last month, and former Coinone listing director Mr. Jeon was indicted on charges of breach of trust on the 7th of this month. The day before, arrest warrants were issued for former Coinone listing team leader Mr. Kim and listing broker Mr. Hwang. Mr. Kim faces charges of breach of trust and violation of the Act on Reporting and Using Specified Financial Transaction Information, while Mr. Hwang is charged with mediation of breach of trust.

According to the prosecution, Mr. Jeon and Mr. Kim received approximately 2 billion KRW and 1.04 billion KRW respectively over more than two years from listing brokers Mr. Go and Mr. Hwang as payment for listings, and obstructed exchange operations by listing coins scheduled for market manipulation on the exchange.

Mr. Kim is also accused of laundering criminal proceeds by converting coins into cash through nominee accounts and using the funds to purchase a villa in Hannam-dong. Broker Mr. Hwang is similarly charged with criminal proceeds concealment for providing coins through nominee accounts from the outset.

Since January, the prosecution has been investigating listing rebate corruption at Coinone, one of the top three domestic virtual asset exchanges, and through this investigation, they identified structural corruption in the Korean coin trading market.

Source=Seoul Southern District Prosecutors' Office

The prosecution pointed out structural problems in the Korean coin trading market, including ▲illegal pre-listing investment solicitation by multi-level marketing operators (such as leading chat rooms and investment companies) ▲exaggeration of project achievements by coin issuers ▲rebate payments between listing brokers and exchange listing staff for coin listings ▲widespread coin market manipulation (MM) after listing ▲and an illegal profit-sharing structure through pump and dump schemes using MM.

The prosecution noted that virtual asset exchanges act as gatekeepers but often neglect their screening function for listed coins, which can harm general investors. Since coins have no intrinsic value, their value is determined after listing.

In particular, Kimchi coins (domestically issued virtual assets) are vulnerable to liquidity shortages and market manipulation, so exchanges have a duty to thoroughly review and decide on listings to protect investors from losses. Sixty-two percent of the total coins circulating in the domestic coin market are Kimchi coins.

A representative Kimchi coin is the Pureever coin, which was involved in the recent kidnapping and murder in Gangnam. Despite the issuing foundation’s poor financial condition, this coin was exclusively listed on Coinone, and immediately after listing, pump and dump activities through MM caused significant investor losses, ultimately leading to murder, according to the prosecution.

Source=Seoul Southern District Prosecutors' Office

The prosecution stated that the internal listing screening procedures at the exchange were essentially a formality. They revealed that the detained Coinone listing officers bought coins to be listed from the issuing foundation at very low prices, resold them at high prices for profit, and encouraged the foundation’s MM activities. While the securities market strictly punishes unfair practices such as disclosure violations and market manipulation under capital market laws, the virtual asset market lacks relevant laws and regulations.

The prosecution also pointed out problems with superficial audits by external audit firms. Virtual asset exchanges require issuing foundations to submit inspection reports from external auditors when applying for listings. However, in reality, listing brokers connected foundations to specific audit firms, obtained formal audit reports, and submitted them to the exchange. The prosecution also confirmed that the listing brokers received rebates from these audit firms and shared them with Coinone listing staff.

The prosecution advised investors to ▲not unconditionally trust coin whitepapers and media promotions ▲suspect MM activities when there are sudden price fluctuations without clear reasons ▲and be aware that listings through listing brokers have a high likelihood of being designated or delisted.

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