In a sign of increasing regulatory scrutiny within South Korea, an appeals court has handed down a stiff seven-year prison sentence to a man, identified only as Hahm, convicted of running a fraudulent cryptocurrency investment scheme.
As reported by The Hankyoreh, this ruling significantly increases Hahms original five-year sentence, emphasizing the seriousness of illegal fundraising activities, regardless of whether crypto or cash is involved.
Heres how the scheme operated: Between February and July 2023, Hahm and a partner held investment seminars across the country. They lured attendees with promises hard to resist – guaranteed principal protection and seemingly impossible daily returns of 1% to 1.38%. To participate, investors had to use a specific payment app linked to a cryptocurrency the organizers were pushing.
Related: South Korea Accelerates Crypto Regulations as U.S. Policies Shift
The court found that this wasn‘t just a small operation. Hahm’s activities involved roughly 140,000 transactions, illegally raising about 446.7 billion won (around $311 million) from the public. Crucially, the appeals court stated these actions counted as illegal deposit-taking under South Korean law.
This decision is significant because it overturned a lower court‘s ruling. That earlier decision had acquitted Hahm on some charges by treating crypto assets differently from cash, based on older legal views. The appeal court’s stance closes that potential loophole, making it clear that rules against illicit fundraising apply firmly to the crypto space in South Korea.
Meanwhile, Terraform Labs Founder Faces Major US Fraud Charges
The crackdown isn‘t limited to local schemes. In a high-profile case with global repercussions, U.S. federal authorities are pursuing South Korean crypto entrepreneur Do Kwon. They’ve charged him with orchestrating a massive, multi-billion-dollar fraud linked to the dramatic collapse of his company, Terraform Labs. Kwon, extradited from Montenegro late last year, pleaded not guilty on December 31 to serious charges including securities and wire fraud.
Prosecutors paint a picture of deliberate deception. They allege Kwon falsely marketed Terraform‘s digital tokens, including TerraUSD, as “stablecoins” securely pegged to assets like the U.S. dollar. However, the prosecution claims Kwon knew the algorithms underpinning these tokens couldn’t actually maintain their promised value.
Related: Terraform Labs Co-founder Do Kwon Extradition Approved by Montenegro Supreme Court
The allegations go further, suggesting Kwon actively manipulated prices through secret deals with trading firms and even used fake blockchain transactions to create a false sense of liquidity and demand for his products.