South Korea Jails Crypto CEO in First-Ever Case Under New Virtual Assets Law

The Seoul court has sentenced crypto asset manager to prison in the first case under the new Virtual Asset User Protection Act.

A South Korean court has sentenced Jong-hwan Lee, CEO of a local crypto asset management company, to three years in prison for manipulating cryptocurrency prices to secure illegal profits.

The Seoul Southern District Court ruled on Wednesday that Lee violated the Virtual Asset User Protection Act and earned about 7.1 billion Korean won (worth about US$4.88 million) through price manipulation.

Findings of the Court

In addition to the prison sentence, the court imposed a fine of 500 million won, almost $344,000, and ordered the forfeiture of about 846 million won, or $581,900 in criminal proceeds. However, Lee was not taken into custody during the legal proceedings as the judges cited his good conduct during the trial.

The court found that between July 22 and October 25, 2024, Lee used an automated trading program to inflate trading volumes and repeatedly place wash trades in the ACE cryptocurrency. Researchers reported that ACE’s daily trading volume rose from approximately 160,000 units to 2.45 million units overnight, with Lee accounting for 89% of the activity.

Min-cheol Kang, a former company employee who was also charged in the case, received a two-year prison sentence, suspended for three years. Although the court confirmed the defendants’ involvement in manipulating ACE for unfair profits, due to insufficient evidence they were partially acquitted of the exact 7.1 billion won.

Interestingly, this case marks the first enforcement under South Korea’s Virtual Asset User Protection Act, which came into effect in July 2024.

Crypto crash in South Korea

As courts move to punish crypto market abuses, other branches of the legal system are grappling with the risks associated with handling digital assets. In January, South Korean prosecutors investigated the disappearance of a large amount of Bitcoin that had been seized and stored as part of a criminal case.

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The problem was discovered during a routine internal inspection at the Gwangju Public Prosecutor’s Office, where officials check access credentials for seized assets, including login credentials stored on removable devices such as USB drives. Although authorities have not confirmed the exact amount lost, local media estimate that the missing Bitcoin could be worth around 70 billion won, or about $47.7 million.

According to officials cited in local reports, the loss may have occurred after a temporary worker visited a fraudulent website, raising suspicion of a phishing attack rather than a direct breach of government systems. It is believed that wallet passwords or access credentials have been exposed, allowing attackers to empty the seized funds.