South Korea launches interagency investigation team to tackle rising crypto crimes

South Korea launched an interagency investigation unit to tackle crypto-currency crimes on Wednesday amid a surge in illegal activities in the market and a lack of legal protections for investors.

The Joint Investigation Centre for Crypto Crimes will be manned by some 30 personnel from judicial, financial, tax and customs agencies, the Prosecutors' Office said in a statement.

"Virtual assets are investment products that already compare to stocks, but market participants are practically left out from legal protection amid incomplete laws and systems," it said.

The Prosecutors' Office said that until the crypto-currency market was regulated under law, the investigation team would fill the gap in investor protection.

Damages from cryptocurrency-related crimes surged 118% over the last five years in South Korea to 1.02 trillion won ($797.81 million) in 2022, according to the statement, with various kinds of crimes emerging from price manipulations to illegal foreign exchange transactions and ponzi schemes.

It said investigations would especially target crypto-currencies of high price volatility or de-listing, for illegal trading practices, tax evasions, unauthorised foreign exchange transfers, concealment of criminal profits and money laundering.

South Korea's crypto-currency market, which had been one of the fastest growing in the world, shrank 66% last year by market capitalisation, on a series of global and domestic events dampening investor sentiment, on top of high interest rates.

On the domestic side, most notably, a crash of so-called stablecoin TerraUSD and its pair Luna in May 2022 led to public outrage over an alleged fraud by Do Kown, the developer of the currencies and a global fugitive caught in Montenegro, who also faces fraud charges in the United States.

Across local crypto-currency exchanges, suspected crime-related transactions jumped 1,263%, to 900 in 2022 from 66 in 2021, according to the statement.