South Korea Rolls Out Interagency Investigation Unit to Tackle Crypto Crime

South Korea is taking steps to tackle the uptick in criminal activities linked to crypto by launching a specialized investigations unit.

The multi-agency joint virtual asset crime investigation unit aims to safeguard the interests of investors while the country awaits comprehensive regulations for the industry.

The Joint Investigation Centre for Crypto Crimes, operating from the Seoul Southern District Prosecutors’ Office, will consist of 30 investigators drawn from several government agencies and bodies, including the prosecution, the Financial Supervisory Service, the National Tax Service, and the Korea Customs Service.

“Virtual assets, which are traded over 3 trillion won (~$2.35 million) every day, with more than 6 million participants, are already investment products comparable to stocks, but the laws and systems are not complete, so market participants are practically left out from the protection of the law,” the Prosecutor’s Office said in a statement.

The Prosecutors’ Office added it will take an active role in protecting investors in the crypto market until appropriate regulations are implemented. One of the goals is to streamline the investigative procedures for crypto-related criminal cases, from detection to analysis.

This fast-track approach will enable more efficient handling of such cases and contribute to curbing illicit activities within the cryptocurrency space.

South Korean agency highlights focus areas

The key focus areas for the investigations will target cryptocurrencies that exhibit high price volatility or are subject to de-listing.

The new unit will also be tasked with investigating and combating various illegal trading practices, such as market manipulation or insider trading, which can exploit the volatile nature of certain cryptocurrencies.

The investigation team will also look into cases of tax evasion related to crypto transactions, unauthorized foreign exchange transfers, and any attempts to conceal criminal profits. Additionally, they are actively targeting cases of money laundering, as cryptocurrencies can potentially be used to obscure the origins of illicit funds.

To highlight the growing challenges and risks associated with the cryptocurrency market, the Prosecutors’ Office said the number of suspected crime-related transactions across local cryptocurrency exchanges jumped as much as 1,263% over the past 18 months: from 66 in 2021 to 900 in 2022 and to 943 in the first half of 2023 alone.

In one of the recent high-profile cases, an opposition South Korean politician, Kim Nam-kuk, is allegedly involved in suspicious crypto trading activities worth 6 billion won ($4.54 million).

The Seoul Southern District Prosecutors’ Office is currently also conducting an investigation into the collapse of the Terra ecosystem last year. The project’s algorithmic stablecoin TerraUSD (UST) and the affiliated LUNA token were the ninth and 10th largest cryptocurrencies by market capitalization, respectively, before their implosion in May 2022, which wiped around $55 billion in investors’ money along with them.