Prosecutors Seek to Convict 20 for $3.2B in Illegal Crypto Trades20. January 2023
• South Korean prosecutors are seeking to convict 20 people for allegedly conducting $3.2 billion worth of illegal crypto transactions.
• These transactions were exploiting the “kimchi premium”, a phenomenon whereby increased trading volumes on South Korean crypto exchanges drive prices above the global average.
• The prosecutors allege that the group made use of 256 domestic bank accounts, pretended the money was being used for overseas trade items, and bribed brokers.
South Korean prosecutors have announced that they are continuing their campaign against illegal kimchi premium traders, and will seek to convict 20 people for allegedly conducting $3.2 billion worth of illegal crypto transactions. The kimchi premium is a phenomenon whereby increased trading volumes on South Korean crypto exchanges drive prices above the global average.
Some South Korean traders have attempted to exploit this by buying tokens like bitcoin (BTC) from overseas over-the-counter vendors via wire transfers. They then dump the coins on domestic crypto exchanges for a hefty profit. During recent bull runs years, domestic retail investors’ trading volumes have tended to rocket upwards extremely rapidly, leading to sudden discrepancies of up to 50% between domestic prices and overseas averages. Current kimchi premium levels stand at under 1%.
In its latest effort to stop illegal kimchi premium trading, the Seoul Central District Prosecutors Office and the Korea Customs Service have indicted 20 people, 11 of whom have been retained in police custody. They allege that the group made use of 256 domestic bank accounts and pretended that the money that went through these accounts – destined for Hong Kong – was being used to pay for overseas trade items. They also claim that the group bribed brokers to help them with their activities.
The prosecution of the kimchi premium traders is part of a wider government effort to regulate the crypto industry in South Korea and protect investors. In recent years, the government has become increasingly concerned about the potential for illegal activity in the sector and the need to ensure that investors are protected. In September 2020, a new set of regulations were introduced to help protect investors and prevent money laundering.
The South Korean government is also looking to introduce a new tax on crypto trading profits that is expected to come into effect in 2021. The proposed tax rate is 20% for individuals and 22% for corporations. This move is seen as a way of encouraging investors to use regulated exchanges rather than turning to illegal activities.
Ultimately, the prosecution of the alleged kimchi premium traders is another example of the South Korean government’s commitment to clamping down on illegal crypto activity and protecting investors. It remains to be seen whether or not the efforts will be successful, but for now it appears that the government is taking a hard line stance on illegal crypto activities.