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Cryptocurrency Fraud – Why Is It Increasing So Rapidly?

The primary reasons for the recent surge in cryptocurrency fraud are information asymmetry and the complexity of its structure.
 

Project structures, token issuance mechanisms, and profit models are often designed in ways that are difficult for ordinary investors to fully understand.
 

This environment creates fertile ground for fraudulent schemes to appear as legitimate investment opportunities.
 

Common types of cryptocurrency fraud include:
 

• Inducing investment by promising high returns

• Multi-level or referral-based structures resembling pyramid schemes

• Providing false listing information

• Guaranteeing profits through automated trading programs

Such conduct may constitute fraud under Article 347(1) of the Criminal Act or violations of the Act on the Regulation of Conducting Fund-Raising Business Without Permission.
 

Because technical explanations and whitepapers often exist on the surface, it is not easy to detect suspicion in the early stages.
 

In particular, schemes that build trust by paying initial returns to early investors make it extremely difficult for victims themselves to recognize warning signs.
 

As a result, cryptocurrency fraud often continues for a significant period before it is finally exposed.
 

Cryptocurrency Fraud Damage – What Legal Issues Arise?

The most critical legal issue in cryptocurrency fraud cases is distinguishing between a mere investment failure and a criminal act of fraud.
 

Whether fraud is established must be assessed based on the circumstances at the time the investment was solicited.
 

If, at the time of solicitation, the promoter had both the intent and ability to repay, a subsequent refusal to repay may constitute only a civil breach of contract rather than criminal fraud.
 

However, if criminal liability is established, the following laws may apply:
 

• Fraud (Article 347(1) of the Criminal Act)

• Violation of the Act on the Regulation of Conducting Fund-Raising Business Without Permission (Articles 3 and 6(1))

• Aggravated Fraud under the Act on the Aggravated Punishment of Specific Economic Crimes (Article 3(1))

From a civil perspective, key issues include:
 

• Claims for damages based on tort

• Claims for return of unjust enrichment

In this process, identifying the perpetrator and tracing the flow of funds are decisive factors in determining the outcome of the case.
 

In cryptocurrency fraud cases, securing digital evidence is essential. This includes:
 

• Cryptocurrency wallet addresses

• Exchange transaction records

• Platform logs

• Chat records

• Investment solicitation materials

Since the subjective element of fraud (intent to defraud) must be inferred from objective circumstances—such as the defendant’s financial status, surrounding conditions, the content of the transaction, and the performance process—unless the defendant confesses, failure to secure such evidence at an early stage may make later proof extremely difficult.
 

Essential Response Steps If You Have Been Defrauded

If you realize that you have fallen victim to cryptocurrency fraud, the first step is to immediately stop any additional transfers and cease attempts to negotiate under the perpetrator’s persuasion.
 

This does not mean that settlement for recovery is prohibited.

However, even during settlement discussions, it is critical to secure evidence and obtain assistance from a legal professional.
 

Another essential step is organizing evidence.
 

You should systematically compile:
 

• Chat records

• Deposit and withdrawal records

• Promotional materials

• Contract-like documents

Afterward, you must carefully determine the timing and method of filing a criminal complaint or reporting to investigative authorities.
 

If a complaint is filed prematurely without sufficient evidence, it may negatively affect the investigation.

Therefore, it is generally more effective to organize evidence thoroughly with professional legal assistance before initiating criminal proceedings.
 

When victims attempt to handle the matter alone, the core nature of the case is often reduced to a simple dispute, or time is wasted without properly identifying the perpetrator.
 

In cryptocurrency fraud cases, initial strategic direction and speed are crucial.
 

This point cannot be emphasized enough.