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Establishment of Joint Investigation Unit to Counter Virtual Asset Crimes


A joint virtual asset crime investigation unit (hereby referred to as the “Joint Investigation Unit”) was established and launched at the Seoul Southern District Prosecutors’ Office on July 26, 2023. The Joint Investigation Unit consists of about 30 experts from seven national agencies, comprising the Prosecutors’ Office, the Financial Supervisory Service (the “FSS”), the Financial Intelligence Unit (the “KoFIU”) of the Financial Services Commission (“FSC”), the National Tax Service (the “NTS”), the Korea Customs Service (the “KCS”), the Korea Deposit Insurance Corporation (the “KDIC”) and the Korea Exchange (the “KRX”).

Although the Act on Protection of Virtual Asset Users has been recently enacted (and will take effect from July 19, 2024), unfair trading practices involving virtual assets, such as market manipulation, are expected to continue until the new law becomes effective. In this sense, the Joint Investigation Unit, in which several government-wide agencies participate, has been launched to create a sound virtual asset ecosystem and thoroughly protect the market participants.

There have been various types of new crimes involving virtual assets, such as (i) the multi-level sale of coins and issuance of troubled coins in connection with virtual asset issuance, (ii) engaging as a listing broker and conducting illegal market making (“MM”) brokerage activities in connection with virtual asset listing, (iii) the use of material nonpublic information, market manipulation, and fraudulent trading in connection with virtual asset trading, and (iv) bribery and creation of illegal political funds, tax evasion, illegal foreign exchange transactions, money laundering and hacking, and operation of an unreported exchange using virtual assets. The Joint Investigation Unit will take prompt and strict measures against the aforementioned crimes involving virtual assets.


Composition of the Joint Investigation Unit

The Joint Investigation Unit will consist of (i) the “Examination and Analysis Team” responsible for the pre-examination of potential criminal activities by analyzing the soundness and business feasibility of virtual asset issuers and distributors and tracking abnormal transactions, (ii) the “Investigation Team” responsible for the selection of the investigation subject based on the pre-examination results, investigation, and collection of criminal proceeds, and (iii) the “Criminal Proceeds Collection Team” responsible for prompt confiscation and collection in cooperation with the Examination and Analysis Team and the Investigation Team in the early stages of the investigation and ultimate collection of criminal proceeds through compulsory execution of seized assets after the final judgment.

This team structure is established based on the research and investigation cooperation system for conventional financial products traded in the capital market, consisting of (i) market monitoring and examination, (ii) research, (iii) criminal referral and notification and (iv) investigation. To help establish this research and investigation cooperation system, the Joint Investigation Unit consists of about 30 experts from finance-related agencies including the KoFIU, FSS, KDIC, and KRX, tax-related agencies, including the NTS and KCS, and the Prosecutors’ Office.


Selective Examination and Investigation Subject

The Joint Investigation Unit is expected to conduct an active examination and investigation of “delisted virtual assets,” which have actually caused damage to investors, “virtual assets subject to investor alert,” which may cause significant losses, such as a price crash, and “highly volatile virtual assets.”

Particularly, the Joint Investigation Unit plans to investigate the following thoroughly:

Persons involved in a solicitation/brokerage business for listing and/or receiving bribes;

Manipulation of the market prices of virtual assets through market making and the use of non-public information;

Evasion of national tax and customs duty on gains obtained from virtual assets;

Illegal foreign exchange transfer and transfer of foreign currencies disguised as trade prices; and

Criminal proceeds concealment, money laundering and other relevant crimes.

For the purpose of establishing the Joint Investigation Unit, the virtual asset experts of the financial and tax authorities and the investigation personnel of the Prosecutors’ Office have been recruited to secure professional investigation capabilities. The Joint Investigation Unit is expected to prioritize investigating the latest incidents involving virtual assets and gradually expand the scope of its investigation. The Joint Investigation Unit is planning to focus on virtual assets that have been delisted, that have been subject to investor alert, and that are highly volatile, because, while there is a growing need for investigation in order to minimize investors’ losses, the impact of such investigation on the virtual assets market is not generally expected to be significant. In light of the foregoing, virtual asset business operators are advised to prepare and review any potential criminal issues in advance. If there is any potential criminal issue related to virtual assets, it would be particularly necessary to review and resolve such issue promptly and thoroughly in advance.


[Korean Version]