South Korea Jails Crypto CEO in First Case Under New Intangible Assets Law

A court in Seoul has handed a crypto asset manager a prison sentence in the first case under the new Asset User Protection Act.

A South Korean court has sentenced Jong-hwan Lee, the CEO of a mobile crypto firm, to three years in prison for manipulating cryptocurrency prices for illegal profits.

The Seoul South District Court on Wednesday ruled that Lee violated the Real Property User Protection Act, earning about 7.1 billion Korean won (worth about $4.88 million) by manipulating prices.

Court Results

In addition to the prison sentence, the court imposed a fine of 500 million won, or $344,000, and ordered the forfeiture of approximately 846 million won, or $581,900 in criminal costs. However, Lee was not arrested during the trial, as the judges cited his good behavior during the trial.

The court found that between July 22 and October 25, 2024, Lee used an automated trading system to inflate trading amounts and place wash trades in ACE’s cryptocurrency. Investigators reported that ACE’s daily trading volume jumped from about 160,000 units to 2.45 million units overnight, and Lee was responsible for 89% of the transaction.

Min-cheol Kang, a former employee of the company who was also charged in the case, received a sentence of two years in prison and three years of probation. Although the court confirmed the involvement of the defendants in defrauding ACE to obtain unfair profits, it partially relieved them of the exact winning amount of 7.1 billion due to insufficient evidence.

Interestingly, this case is the first to be used under South Korea’s Virtual Asset User Protection Act, which went into effect in July 2024.

South Korea’s Crypto Mishap

As the courts move to punish abuses in the crypto market, other branches of the legal system are facing the risks associated with managing digital assets. In January, South Korean prosecutors were investigating the disappearance of a large sum of Bitcoin that was seized and held as part of a criminal case.

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The problem was discovered during a routine internal inspection at the Gwangju District Prosecutors’ Office, where officials checked access information to identify seized assets, including information stored on removable devices such as USB drives. Although the authorities have not confirmed the exact amount lost, local media estimated that the lost Bitcoin may be worth around 70 billion, or about 47.7 million dollars.

According to officials cited in local reports, the loss may have occurred after an agency employee accessed a fake website, which raised suspicions of a phishing attack rather than a direct breach of government systems. It is believed that wallet passwords or access information may have been exposed, allowing attackers to use the seized funds.