A South Korean court has sentenced two executives from the cryptocurrency exchange Bitsonic for orchestrating a fraud that resulted in a $7.5 million loss to customers.
According to local media outlet Yonhap News, The Seoul District Court sentenced Bitsonic’s CEO, Jinwook Shin, to seven years in prison and the vice president of technology, referred to as Mr. A, to one year in jail.
The court found Shin guilty of fraud, forging and falsifying records, and obstructing a business via computer.
Bitsonic’s technology vice president, Mr. A, received a one-year jail sentence for computer-related business obstruction charges.
Their actions have led to a significant erosion of trust in cryptocurrency exchanges, with the court noting the damage caused by their lack of remorse and responsibility evasion.
Shin was arrested on Aug. 7, 2023, following allegations that he manipulated transaction volumes on the exchange between January 2019 and May 2021. He achieved this by using Bitsonic’s funds to purchase the exchange’s own token, thereby artificially boosting its price.
Further, Shin entered false entries of South Korean Won into the exchange’s system to simulate cash deposits. Mr. A supported these fraudulent activities by creating a program that inflated prices by purchasing cryptocurrency owned by Shin.
Additionally, Shin misled investors with a fake announcement about a partnership with an international exchange. This deception came to light when investors were unable to withdraw their funds, leading to the discovery that Shin had diverted $7.5 million in customer deposits for his own use.
Bitsonic ceased its operations in August 2021, attributing the closure to both internal and external issues, leaving a “significant amount” of customer funds unaccounted for.
In a related development, Seoul’s Prosecutors Office arrested the CEO and two executives of Haru Invest, a crypto yield platform, on the same day.
The arrests came after Haru Invest suspended withdrawals in June 2023, with accusations against the executives for embezzling $830 million worth of cryptocurrency from 16,000 users. It is alleged that they misappropriated the majority of these funds through reinvestments conducted from March 2020 to June 2023.
South Korea is increasing its focus on the blockchain and cryptocurrency sector, seeking more oversight and regulation. The government is requesting reports on unregistered service providers and requiring crypto asset disclosures from its officials.
The nation’s leading financial authority has introduced regulations to protect crypto investors while federal prosecutors target violators. Among the notable actions is the pursuit of Terraform Labs and its founder, Do Kwon, which is linked to a $60 billion ecosystem collapse that impacted the global cryptocurrency market.