Elliptic and CODE join forces to propel crypto compliance in Korea

South Korea’s financial authority is moving to strengthen its ability to intervene early in suspected cryptocurrency price manipulation cases by seeking explicit legal authority to freeze related accounts. According to News1, the Financial Services Commission (FSC) plans to include the measure in the upcoming second phase of the country’s cryptocurrency legislation. Under the proposal, when financial accounts are suspected of being used to manipulate crypto prices, the FSC would be able to coordinate with financial institutions and cryptocurrency exchanges to freeze the funds.Photo by Ethan Brooke on UnsplashClosing gaps in illicit fund recoveryThe initiative is intended to address a long-standing enforcement challenge. Authorities have often struggled to recover illicit gains because funds can be moved elsewhere while investigations and court proceedings—often lasting up to three years—are still ongoing. By allowing accounts to be frozen before a formal investigation is launched, the proposal aims to close a critical gap in illicit fund recovery. An official from the authority cited a recent precedent to illustrate the measure’s potential impact. In September, a government task force disrupted a stock price manipulation case involving roughly 100 billion won ($69 million), of which about 40 billion won was illicitly obtained. It marked the first time the government implemented an early account freeze, preventing additional funds from being transferred beyond its reach. The official added that the same approach could be applied to cryptocurrency price manipulation cases when suspicious transactions are detected through Korean crypto exchanges. However, the measure would not be effective against activity conducted via overseas platforms. The proposal comes as the government continues to refine the second phase of its crypto regulatory framework, which is expected to focus primarily on stablecoin regulations. While authorities had originally planned to submit the bill to the National Assembly by the end of last year, the timeline has been pushed to this year as financial and monetary regulators work through unresolved differences. One point of contention lies between the Bank of Korea and the FSC. The central bank supports allowing only bank-majority consortia to issue stablecoins, while the FSC opposes setting a bank-ownership threshold, arguing for the inclusion of non-bank participants. Alongside enforcement and regulatory reforms, the government is also signaling a broader push to expand investor access to digital assets. A Jan. 9 document from the Ministry of Economy and Finance showed the government plans to permit trading in spot crypto ETFs to improve investor access under its 2026 economic plan. Against this policy backdrop, traditional financial firms are pressing ahead with their own digital asset initiatives, seeking to position themselves within the evolving framework. Life insurer explores blockchain collaborationsKyobo Life Planet Life Insurance, a mobile-only subsidiary of Kyobo Life Insurance, has partnered with Singapore-headquartered crypto exchange Crypto.com. According to South Korean media outlet Financial News, under the agreement, eligible users will receive benefits on Crypto.com, while reward points earned through Kyobo Life Planet’s healthcare platform can be used within the exchange’s ecosystem. The collaboration reflects broader efforts by the parent company to expand into digital assets. Last month, Kyobo Life Insurance joined Circle’s public testnet, Arc, to assess the technical feasibility of stablecoin-related infrastructure. 

Dispute Embroils Bitget in Legal Battle With Crypto InfluencerBitget, the crypto exchange registered in Seychelles, finds itself entangled in a legal dispute with prominent crypto influencer Evan Luthra.Photo by Tingey Injury Law Firm on UnsplashAccount freezing allegationsThe conflict stems from Luthra’s allegations of account freezing and loss of funds after a token listing incident in March. Luthra has filed a lawsuit against Bitget, accusing the exchange of withholding $200,000 in Tether (USDT) without adequate explanation, while also freezing his account.The legal drama follows Luthra’s involvement with the Reel Star project, where he served as an advisor for the platform which is aimed at creators. As compensation for his collaboration with the project, Luthra received Reel Token (REELT), the project’s utility token.Bitget alleged market manipulationUpon the listing of REELT tokens, Luthra reportedly sold 1.3 million tokens on Bitget. In response, Bitget claims it faced a manipulative attack orchestrated by a group of traders attempting to profit from market manipulation immediately after the token’s listing. This allegedly caused a significant drop in the token’s price, prompting Bitget’s decision to freeze Luthra’s account.Bitget states that it contacted Luthra seeking an explanation for the suspicious trading behavior. Luthra acknowledged the token sale but failed to provide satisfactory reasons for his actions, according to Bitget’s version of events. The exchange maintains that user protection is its foremost priority and that it takes swift action against illegal or fraudulent behaviors.$16 million damages claimLuthra refutes the allegations, asserting his innocence and citing alleged approval from Reel Star’s Co-Founder Navdeep Sharma for his token sale plans. He seeks a substantial $16 million in damages, in addition to the frozen funds. Luthra claims that Bitget unjustly deprived him of his tokens, asserting his status as a fully KYCed user entitled to access his holdings.In the aftermath of the incident, Bitget conducted an investigation and offered a compensation plan for affected clients. Gracy Chen, Bitget’s Managing Director, emphasized the exchange’s commitment to user protection and its actions against illicit activities on its platform. Addressing the matter on Twitter, Chen didn’t hold back in her commentary on Luthra, stating that he “has a history of fraudulent activities,” which she says were exposed by crypto journalist CoffeeZilla.The legal dispute has ignited debates within the crypto community. Supporters of Luthra contend that his case underscores broader issues faced by users of centralized exchanges, shedding light on the need for improved user rights and protection. On the other hand, some argue that Bitget acted appropriately to safeguard its users and the market integrity.CZ brought into the disputeThe legal battle has attracted attention from influential figures in the crypto industry. Against a backdrop of a very public airing of the dispute on Twitter, in a recent tweet Luthra invited Changpeng Zhao (CZ), the CEO of Binance, to respond to Luthra’s claim that Bitget spreads rumors about other exchanges. CZ was having none of it, writing: “You should talk to them, right? We are not a regulator for other exchanges.”The case highlights the intricate challenges surrounding market manipulation and token listings within the crypto space. As it unfolds, the outcome could potentially set a precedent for similar situations involving token listings, market manipulation, and user protection.

Backpack Exchange, a crypto exchange that joined the Japan Virtual Currency Exchange Association (JVCEA) last December, has recently acquired FTX EU, the European arm of the failed crypto exchange business FTX. According to a press release, the business comes with a European MiFID II license, with the acquisition having been approved by the Cypriot regulator, the Cyprus Securities and Exchange Commission (CySEC). Furthermore, a Delaware bankruptcy court in the United States, which is dealing with the FTX bankruptcy, has also rubber-stamped the acquisition. Backpack Exchange was co-founded by CEO Armani Ferrante, alongside other former FTX executives. According to the firm’s LinkedIn page, it has established its headquarters in Japan. The company also has links to Dubai, having acquired a Virtual Asset Service Provider (VASP) license for its Backpack Wallet product from  Dubai’s Virtual Assets Regulatory Authority (VARA) in 2023.Photo by Christian Lue on UnsplashRebuilding trust As a consequence of having acquired FTX’s European arm, Backpack Exchange will now assume responsibility for the distribution of court-approved FTX bankruptcy claims to FTX EU users. In the company’s press release, Ferrante spoke of the importance of the distribution process in rebuilding trust. He stated: "Customer restitution is a crucial step to rebuild trust and confidence in the industry, and Backpack is committed to returning FTX EU customers’ funds as fast and as safely as possible." In response to a query from FTX creditor activist Sunil Kavuri on X, Ferrante outlined that FTX EU users “will only be able to claim their euro claims funds directly from Backpack EU.” Ferrante clarified that FTX EU customers who had pending crypto withdrawals at the time of the bankruptcy will have their crypto claims dealt with via the FTX bankruptcy estate. In a Series A financing round early last year, Backpack was valued at $120 million. Through FTX EU, it now acquires a MiFID II license, further facilitating the global expansion of the company. With FTX EU now forming Backpack’s EU arm, the company will offer crypto-derivative products, including perpetual futures. This product offering is scheduled to go live in Q1 2025. Bankruptcy process controversy The bankruptcy of FTX EU has been controversial, starting off with the European entity being illegally filed into a U.S. bankruptcy process. In early 2024, the FTX Debtors suggested that the entity was worthless. It later wanted to buy out the entity itself, outbidding a third-party bidder. A short time afterwards, the FTX Debtors reached a settlement with the former FTX EU team. It’s understood that Backpack has acquired FTX EU for $32 million.  The FTX Debtors’ attempt to buy the business itself has cast a cloud over the bankruptcy process. When it first emerged that the business had been sold, there was some speculation as to if this would mean a rebooted FTX within the European market, but Backpack’s acquisition confirms that this was not to be the outcome.  Japan could have offered another opportunity to reboot the business, but instead, FTX Japan was acquired by bitFlyer and absorbed into its existing business. With regard to the main FTX business entity, the FTX Debtors told the bankruptcy court that there was no interest in the business from buyers.