Life Sentences for Crypto Scammers

South Korea’s financial regulator has warned that crypto scammers who defraud victims of more than $4 million (5 billion Won) could now face life sentences. This move marks a significant escalation in the country’s fight against cryptocurrency fraud and aims to protect investors from large-scale scams.

A Response to Major Crypto Frauds

The new legislation, known as the Virtual Asset Users Protection Act, was enacted in July 2024. Lawmakers were partly inspired by the actions of Do Kwon. The South Korean founder of Terraform Labs, and the collapse of the crypto exchange FTX.

Impact of Terraform Labs’ Collapse

Do Kwon’s Terraform Labs saw its cryptocurrencies, TerraUSD and Luna, crash in May 2022. The implosion wiped out $40 billion in shareholder value overnight. Many believe this event sparked the prolonged “crypto winter.” A period where crypto asset prices remained deflated for well over a year.

Stringent Penalties and Protective Measures

Beyond life sentences for major offenders, the Virtual Asset Users Protection Act includes fines of up to three to five times the illegal crypto-based profits. Fixed-term jail sentences of up to one year are also possible. Lee Bok-hyun, head of the Financial Supervisory Service (FSS), told digital asset executives that the financial government will enforce the act rigorously.

Enhanced Security for Investors

The act also requires Virtual Asset Service Providers to keep at least 80% of their customers’ funds in cold storage. They must set aside a reserve fund to cover potential cybersecurity breaches. These measures aim to make the digital asset world safer for Korean investors.

Scammers Go to Great Lengths

Given South Korea’s tough stance on crypto regulation, scammers are going to great lengths to evade authorities. One alleged crypto scammer reportedly spent $16,000 on plastic surgery and used various wigs to avoid capture. Meanwhile, Do Kwon traveled across multiple countries—including Singapore, Dubai, and Serbia—before being apprehended in Montenegro.

South Korea’s decision to impose life sentences for large-scale crypto scams marks a significant escalation in the global fight against digital fraud. By combining severe penalties with protective measures for investors. The country aims to restore trust in the cryptocurrency market. As regulators worldwide watch closely, South Korea’s actions may set a new standard for crypto regulation.