Gyeonggi Officials with Cryptocurrencies Clear of Professional Conflicts in Virtual Assets

Crypto Exchange HTX Reports $8 Million Hack Over WeekendCrypto exchange HTX confirmed on Monday that it fell victim to a hack over the weekend, resulting in losses amounting to 5,000 ETH ($8 million).HTX stakeholder Justin Sun, Founder of layer one blockchain TRON, disclosed the breach via an X post. In a series of subsequent X posts, Sun assured users and stakeholders that the exchange had promptly covered the losses, and current user deposits remained secure. He also emphasized that the platform was operating normally despite the security incident.Photo by GuerrillaBuzz on UnsplashHacker incentiveThe TRON Founder also extended an offer to the hacker responsible for the breach. He proposed a 5% reward for the return of the remaining funds, a figure notably lower than the 10% often offered to hackers in similar situations. Additionally, Sun dangled the possibility of a job at the exchange. That’s an unusual response to a cryptocurrency hack and one that had one commentator speculating upon the notion that the hacker belonged to the notorious North Korean Lazarus hacking group, pondering the prudence of such a move.Data from DeFi data aggregator DeFiLlama revealed that Seychelles-based HTX, formerly known as Huobi, witnessed nearly $10 million in outflows, with a remaining $2.73 million in customer deposits as of the latest data.Hacker’s identity may be knownThe hacker, who received a series of messages from an address identified as an HTX hot wallet by Nansen, was presented with a stark choice. The messages, written in both English and simplified Chinese, claimed to have uncovered the hacker’s true identity and urged the return of the stolen funds to the address 0x18709E89BD403F470088aBDAcEbE86CC60dda12e. In return, HTX offered a 5% “white hat bonus” valid until October 2, 2023. If the funds were not returned by that date, law enforcement would be involved, the message warned.The hack came shortly after Justin Sun shared a promotional video in which he depicted himself defeating a hooded figure symbolizing a hacker “shorting crypto” with a single punch while on a spaceship journey to what appeared to be Mars.Insolvency fearsOn Tuesday, Sun outlined that the exchange had established a “SAFU” (Safe Asset Fund for Users) fund for platform users. However, taking to X on Monday, Adam Cochran, Managing Partner at Cinneamhain Ventures, claimed that there was a likelihood that the HTX business is insolvent. Cochran maintains that available data suggests a shortfall in crypto holdings relative to HTX users' assets.Travis Kling, Founder and Chief Information Officer of Ikigai Asset Management, went one further on X, stating:”Not “probably”. Huobi is insolvent.”Kling, a long-time critic of Binance, went on to suggest that if Huobi were to collapse, that event would likely lead to Binance unraveling also.HTX originated in China and nowadays maintains offices in Singapore, Japan, South Korea, Hong Kong, and the UK. It has long been speculated that Justin Sun has a controlling stake in the HTX business. Sun has denied that assertion, instead suggesting that he is a member of HTX’s “Global Advisory Board.”

Korean Police Establishes Task Force to Tackle Virtual Asset-Related CrimesIn response to the recent increase in virtual asset-related crimes in South Korea, the country’s police agency is establishing a dedicated task force to combat these illegal activities, according to local media outlet News1. This action by the National Police Agency comes as virtual asset legislation gained momentum and as prosecutors launched a joint virtual asset investigation division. Additionally, the police are considering establishing a new regional investigation unit focused on virtual asset-related investigations in the future.Photo by Sungho Song on PixabayMulti-divisional approachDuring this month, the police will consolidate various functions related to virtual asset investigations within its headquarters to establish the task force. This group will convene monthly meetings to exchange information on ongoing investigations and will also extend invitations to on-site investigators for the purpose of studying the most effective investigative methods and staying updated on the latest trends in virtual asset-related crimes.The task force will be jointly overseen by the heads of the Cyber Investigation Bureau and the Investigation Bureau and will consist of members from several divisions, including the Cyber Investigation Planning Division, Economic Crime Investigation Division, Cybercrime Investigation Division, Cyber Terrorism Response Division, Narcotic and Organized Crime Investigation Division, and National Security Investigation Command Division.Escalation of virtual asset crimesBy the end of the first half of this year, the global crypto market value reached $1.17 trillion, coinciding with a notable uptick in crypto-related criminal activities. In 2021, there were 427 instances of domestic fraud cases linked to cryptocurrencies, resulting in the arrest of 1,717 individuals. However, in 2022, these numbers increased to 628 cases involving 2,123 people. Furthermore, from January to July of the current year, the police have apprehended 1,146 individuals in connection with 327 cases related to cryptocurrency crimes.However, responding to virtual asset-related crimes presents a significant challenge due to their diverse nature and wide-ranging applications. For example, incidents involving crypto hacking typically fall under the jurisdiction of the Cybercrime Investigation Division. On the other hand, cases related to fraudulent crypto investment schemes are typically handled by the Economic Crime Investigation Division, while the Narcotic and Organized Crime Investigation Division concentrates on instances of drug trading conducted using cryptocurrencies.Paving the way for specialized expertiseFurthermore, as part of the task force’s efforts, the police will seek input and feedback regarding the potential establishment of a new department focused exclusively on investigating virtual assets in the future. A police official mentioned that the creation of such a dedicated unit is seen as a desirable step that could facilitate the development of specialized expertise among on-site officers. Looking ahead, the police are also contemplating the formation of a regional investigation unit specifically dedicated to cryptocurrency-related investigations, a unit akin to the existing Financial Crimes Investigation Unit.Upcoming law implementationThe police’s decision to form a working group is seen as a proactive step in preparation for the forthcoming Virtual Asset User Protection Act, slated to take effect in July next year. This legislation is designed to enable legal action against unfair trading practices related to virtual assets, including the misuse of undisclosed information, market manipulation, and illicit transactions. It parallels the regulatory framework applied to financial investment products.In August, public prosecutors took action by launching a joint cryptocurrency investigation division at the Seoul Southern District Prosecutors’ Office in collaboration with several key agencies, including the Financial Supervisory Service (FSS), Financial Intelligence Unit (FIU), National Tax Service (NTS), Korea Customs Service (KCS), Korea Deposit Insurance Corporation (KDIC), and Korea Exchange (KRX). Moreover, in light of the growing importance of legal issues related to cryptocurrencies, prominent law firms have been swiftly mobilizing to establish specialized teams dedicated to handling crypto legal cases.This trend is not limited to South Korea alone; it is also unfolding in other countries. For instance, in a parallel development, the Hong Kong Police Force and the Securities and Futures Commission (SFC) have recently instituted a working group to monitor and address suspicious activities linked to virtual asset trading platforms (VATPs).

Rising Cryptocurrency Arbitrage Transactions Raise Concerns in South KoreaThe number of arbitrage transactions between South Korean and foreign cryptocurrency exchanges has been experiencing a notable uptick, according to a report by local media outlet Maeil Business Newspaper.In recent developments, foreign actors engaging in price manipulation have been transferring substantial amounts of cryptocurrency assets to Korean exchanges, driving up prices. Subsequently, they transfer these tokens from Korean exchanges back to overseas platforms, capitalizing on the price discrepancies to generate profits.Photo by Maxim Hopman on UnsplashBithumb’s case in H1According to documents submitted to Kim Hee-gon, a member of the ruling political party People Power Party, on Monday, KRW 3.4 trillion ($2.6 billion) worth of tokens were moved from Bithumb, a leading Korean cryptocurrency exchange, to foreign trading platforms during the first half of this year. Although this figure marks a 40% decrease compared to H1 2022’s KRW 5.7 trillion, primarily due to the significant decline in token prices across the cryptocurrency market, it’s noteworthy that the number of transactions has seen a significant increase.Other exchangesGopax, another major exchange in the nation, recorded token outflows totaling KRW 12.3 billion. On the other hand, Upbit, Coinone, and Korbit, which are also prominent exchanges, declined to provide data due to reasons like confidentiality concerns. However, given that Upbit holds an 82.0% share of the Korean crypto market, nearly four times larger than Bithumb’s share (14.2%), it is suspected that the volume of tokens transferred from Upbit to foreign platforms would likely have followed a similar proportion.While the value of tokens sent from Bithumb to overseas operators saw a year-over-year decrease, the number of transactions surged to 231,302, nearly doubling the figure of H1 2022’s 124,048 transactions. The average transaction size was KRW 14.7 million.Even though the overall enthusiasm for cryptocurrencies might have cooled off since last year, the spike in the number of transactions suggests that there’s been a surge in arbitrage trading between Korea and foreign markets.Kimchi premiumEarlier this month, a significant transaction caught the eye of cryptocurrency market observers in South Korea. On September 1, crypto data analytics firm Arkham identified that 170,000 CyberConnect (CYBER) tokens were transferred to Bithumb from a crypto wallet thought to be owned by DWF Labs, a firm specializing in cryptocurrency trading and investment. The timing of the transaction coincides with a period during which the Kimchi premium for CYBER exceeded 100%. The Kimchi premium refers to the crypto price gap between Korean exchanges and their foreign counterparts.The complicating factor here is that DWF Labs is a foreign entity that is managed by a foreign team.The use of corporate accounts is virtually prohibited in the Korean crypto market. The Travel Rule mandates that any transfers of tokens between Korean and international exchanges must go through accounts that have been verified under Know Your Customer (KYC) guidelines. Given these regulations, there are growing suspicions within the crypto community that foreign venture capitalists may have used accounts in borrowed names to conduct sales on Korean exchanges, which are restricted to Korean citizens. However, it’s worth noting that there is currently no legal basis for taking punitive action even if borrowed-name accounts were indeed used.Lawmaker Kim commented on the limitations of current financial regulations aimed at preventing money laundering in the cryptocurrency market. Despite efforts by financial authorities, including the introduction of the Travel Rule, Kim stated that these measures have not been very effective. He emphasized the urgency of enhancing the regulatory framework to curb potential illicit activities involving cryptocurrencies, such as those exploiting market arbitrage opportunities.