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Korean Prosecutors Allocate $734K Budget for Crypto Crime InvestigationsThe South Korean Supreme Prosecutors’ Office has earmarked a budget of up to KRW 986 million (approximately $734,000) this year for investigations pertaining to virtual assets, according to data received by the local newspaper Law Times from the Ministry of Justice last Thursday. The significant size of the budget suggests that the prosecution is prioritizing efforts to combat the growing surge in virtual asset-related crimes.Photo by Tingey Injury Law Firm on UnsplashBudget divisionWithin this budget, KRW 778 million has been designated for the purchase of software licenses for virtual asset tracing and analysis equipment, while KRW 280 million has been allocated for an integrated strategic plan to establish a platform for analyzing and tracing unauthorized virtual asset transactions. The budget for this platform consists of preliminary planning costs. Related expenditures are expected to increase as the project is fully implemented.“It is true that our budgets are being concentrated on crimes related to virtual assets due to the fact that they have recently become a social issue,” said a prosecution official. “It may not be a lot compared to our overall budget, but assigning almost KRW 1 billion for one specific field of investigation is still a considerate amount.”Rising crypto crimesIn Korea, crimes associated with virtual assets have been increasing annually. This includes tax evasion, bribery, foreign exchange law violations, and money laundering, as well as cryptocurrency market issues including issuance, listing, and distribution. According to the Supreme Prosecutors’ Office, reported cases of suspicious virtual asset transactions received by the Korea Financial Intelligence Unit (KoFIU) surged from an average of 66 cases per month in 2021 to 900 cases in 2022, then 943 cases in 2023 — a fourteen-fold increase in just three years.Subsequently, the scale of the damages caused by cryptocurrency crimes has also seen a sharp rise. The total value of all reported damages skyrocketed from KRW 467.4 billion in 2017 to KRW 1.02 trillion last year, more than doubling in five years. The cumulative loss over this period exceeds KRW 5.3 trillion.Focused effortsThe prosecution has thus dispatched financial experts from organizations including KoFIU and Korea Exchange to create a joint virtual asset crime investigation unit under the Seoul Southern District Prosecutors’ Office dedicated to investigating cryptocurrency crimes.The prosecution’s Cybercrime Investigation Division has also begun developing a tracking system optimized for the Korean market to trace the flow of virtual assets. The foreign software that is currently being used for tracking comes with considerable expenses and limitations, particularly for tracking flows within the domestic market, where there are many transactions involving smaller, locally-issued cryptocurrencies called “kimchi coins.”“We are dedicating our manpower and technological development to virtual asset investigations,” said a high-ranking official from the prosecution. “We will also strive to secure the budget necessary for these efforts.”

A recent survey of South Korean crypto investors showed a modest shift toward a more positive short-term view on Bitcoin, although market data since the poll was released has yet to strongly support that outlook. The regular survey, conducted last week by CoinNess and Cratos, found that 44.8% of Korean respondents expected Bitcoin to rise or surge this week, up from 35.2% in the previous survey.Photo by Jievani Weerasinghe on UnsplashThe share of respondents expecting Bitcoin to move sideways fell to 28.3% from 33%, while those forecasting a decline or sharp drop decreased to 26.9% from 31.8%. The figures indicate that bullish responses increased from the previous week, while neutral and bearish responses declined. However, with several days having passed since the survey was released, Bitcoin’s price action has so far offered a more cautious picture. At the time of writing, Bitcoin was trading at $77,085.07, down 1.14% from a week earlier, according to CoinMarketCap. The survey also showed that investors remain wary of the broader market environment. Asked how recent macroeconomic uncertainty and market volatility had affected the difficulty of crypto investing, 40.5% said it became “much more difficult,” and 35.3% said it became “somewhat more difficult.” That means roughly three-quarters of respondents said crypto investing has become harder than before. Another 16.6% said conditions were little changed, while 7.6% said investing became easier. GIWA Chain targets cross-border financeWhile retail investors appear cautious about the near-term market backdrop, major Korean firms are continuing to push ahead with blockchain projects tied to cross-border finance. Dunamu, the operator of Upbit, South Korea’s largest crypto exchange, said it has signed a memorandum of understanding (MOU) with Hana Financial Group and POSCO International to develop services for overseas remittances, payments, and corporate treasury management. The project brings together Dunamu’s layer-2 blockchain, GIWA Chain, Hana Financial Group’s foreign exchange network, and POSCO International’s global supply-chain platform. The companies said the collaboration will focus on faster international transfers, more efficient corporate fund management, and new digital finance services. The firms also plan to test whether some processes currently handled through the SWIFT network can be moved onto GIWA Chain. Coinone sanctions put on hold by courtOn the regulatory front, a court has temporarily halted enforcement of sanctions against crypto exchange Coinone, after the Korea Financial Intelligence Unit (FIU) ordered a fine and partial business restrictions over alleged anti-money laundering (AML) violations. The measures had been set to take effect on April 29. According to the Maeil Business Newspaper, the court said the stay would remain in effect until May 29 while it considers Coinone’s request to suspend the sanctions. It stressed that the decision was provisional and did not constitute a final ruling on the request. Earlier this month, the FIU, South Korea’s financial intelligence agency under the Financial Services Commission (FSC), imposed a KRW 5.2 billion ($3.52 million) administrative fine on Coinone for alleged violations of the country’s financial transactions law. The regulator also ordered a three-month restriction on virtual asset transfers for new customers, covering both deposits and withdrawals. 

Singapore’s Terraform Labs, the company founded by incarcerated crypto entrepreneur Do Kwon, has filed for Chapter 11 bankruptcy protection as a mechanism to shield itself from potential severe penalties in the U.S. Securities and Exchange Commission's (SEC) securities fraud lawsuit.Photo by Melinda Gimpel on UnsplashPursuing an appealThe bankruptcy filing, submitted on Tuesday in the U.S. Bankruptcy Court for the District of Delaware, aims to allow Terraform Labs to pursue an appeal against the SEC's allegations. In the filing, Terraform Labs CEO Chris Amani emphasized the critical nature of the bankruptcy protection for the company's ongoing operations, preservation of value for creditors, including the Terra community, and the pursuit of an appeal against the SEC enforcement action. Amani expressed concerns that, without Chapter 11 protection, the company could face liquidation after the trial, forfeiting its right to appeal and leading to disastrous consequences for its business. Having acted as Terraform’s chief operating officer earlier in 2023, last July Amani was appointed as the firm’s CEO. Protection afforded by Chapter 11The estimated assets and liabilities of Terraform Labs fall between $100 million and $500 million, as disclosed in the firm’s bankruptcy filing earlier this month. Amani highlighted the potential financial strain resulting from a substantial money judgment, indicating that the company might not be able to satisfy such a judgment or post the necessary supersedeas bond for an appeal, a bond that must be provided by a petitioner who attempts to have a judgment set aside, without the protection afforded by Chapter 11. The SEC charged Terraform Labs and former CEO Do Kwon with securities fraud in February 2023, accusing them of orchestrating a "multi-billion dollar crypto asset securities fraud." The Commission claimed the company raised billions from investors through unregistered transactions, offering an interconnected suite of crypto asset securities. Terraform Labs disputes the SEC's summary judgment decision, asserting that the cryptocurrency tokens in question are not securities under the Acts and that the SEC's jurisdiction is not applicable. The potential consequences of liquidation extend beyond the company itself, impacting hundreds of thousands of Luna cryptocurrency holders, the same individuals the SEC purportedly seeks to protect. Luna operates on the Terra blockchain maintained by Terraform Labs. Terraform Labs, known for the algorithmic stablecoin TerraUSD and its sister cryptocurrency Luna, filed for bankruptcy protection in the wake of the infamous collapse of both in May 2022. The SEC's case stems from that $40 billion collapse of TerraUSD and a previous version of Luna, accusing Terraform Labs and Kwon of misleading investors about the stability of TerraUSD. Kwon was arrested in March of last year in Montenegro for using false documents. He is currently detained in Montenegro, following his attempt to travel to Dubai with a fake Costa Rican passport. The Terraform founder is currently awaiting extradition to either the United States or South Korea. Both Do Kwon and Terraform Labs deny committing fraud, with the SEC trial scheduled to commence in New York in late March.