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Blogs Corporate & BizGenerative AI and Personal Data: What Businesses Should Check Before Uploading Customer Information or Contracts
Businesses are increasingly using generative AI to review contracts, summarize meetings, respond to customer inquiries, and draft documents. However, when contracts or other materials entered into an AI service contain personal data relating to customers or employees, the issue extends beyond operational efficiency. It may raise concerns regarding personal data processing, confidentiality, and the management of internal business information. Businesses should therefore understand how an AI service stores and uses input data and establish internal rules that reflect how generative AI is actually used within the organization. How Is Information Entered into Generative AI Processed? From the user’s perspective, generative AI appears to involve simply entering a question and receiving a response. In practice, however, prompts and uploaded files are transmitted to the service provider’s systems. Depending on the service policy and account type, they may be retained as conversation records or system logs and may also be used to improve the service. Before entering business materials, companies should check: ▪️ Whether input data may be used to train the AI model ▪️ How long conversations and uploaded files are retained ▪️ Whether conversations and uploaded materials can be deleted ▪️ In which country and on which servers the data is processed ▪️ What access permissions are granted when the AI is connected to external applications or internal systems Using a paid or enterprise account does not automatically resolve every data protection issue. The relevant contractual terms and actual data-processing arrangements must also be reviewed. Is Information No Longer Personal Data Once the Name Is Removed? Removing a customer’s name or contact information from a contract does not necessarily mean that the remaining information is no longer personal data. Personal data includes not only information that directly identifies an individual, such as a name, but also information that may identify a person when combined with other readily available information. Even after a name has been removed, an individual may still be identifiable through a combination of information such as: ▪️ The company name and a specific job title ▪️ The contract date and transaction amount ▪️ The employee’s department and performance evaluation ▪️ Detailed consultation history and family relationships ▪️ A case number and the location of a dispute A company name alone is generally information about a legal entity. However, when combined with a specific position, transaction details, or other contextual information, it may make an individual employee or representative identifiable. Businesses should therefore remove information that is unnecessary for the intended task rather than deleting names alone. Actual names, contact details, company names, and similar identifiers may also need to be replaced with fictional or generic information. Does Entering Customer Information Automatically Violate Korea’s Personal Information Protection Act? Entering customer information into a generative AI service does not automatically constitute a violation of Korea’s Personal Information Protection Act, commonly referred to as the PIPA. However, a business may generally use personal data only within the scope of the original purpose of collection and an appropriate legal basis. It is therefore necessary to assess whether the intended AI use is related to the original processing purpose and whether additional consent or another legal basis is required. The relationship between the business and the AI service provider must also be reviewed. The applicable legal framework may differ depending on whether the provider processes data solely on the company’s instructions or also uses the input data for its own purposes, such as model training or service improvement. Depending on the actual arrangement, the use of the service may involve outsourced processing, third-party provision, or other forms of data processing. If personal data is transferred to servers or service providers located outside Korea, the requirements governing overseas transfers must also be considered. The applicable rules cannot be determined solely from the fact that customer information was entered into an AI service. Businesses should review the actual contractual structure and data flow, including: ▪️ The legal basis for using personal data in the relevant AI task ▪️ The purposes for which the service provider uses input data ▪️ Whether the data is used for training or service improvement ▪️ The data-retention period and deletion procedures ▪️ The server locations and countries to which data is transferred ▪️ The involvement of subprocessors or downstream service providers ▪️ How input data is handled after the service contract ends Contracts and Consultation Records Raise More Than Personal Data Issues Contracts and customer consultation records may contain confidential business information in addition to personal data. Examples include: ▪️ Transaction terms and supply prices ▪️ Sales strategies and business plans ▪️ Technical materials and development information ▪️ Confidentiality obligations agreed with customers or business partners ▪️ Strategies for litigation, investigations, or other disputes ▪️ Non-public financial information and internal decision-making materials Entering such information into an external generative AI service may raise issues under the PIPA, but it may also create risks involving contractual confidentiality obligations, trade secret protection, customer security agreements, and internal company policies. A corporate generative AI policy should therefore cover not only personal data but also trade secrets, contractual information, technical materials, and dispute-related documents. Internal Rules Businesses Should Establish for Generative AI Use When employees are left to decide individually how generative AI should be used, the company may be unable to identify what information has been entered into which external service. Rather than issuing a general instruction not to enter personal data, businesses should establish practical and specific rules that employees can follow in their day-to-day work. 1. Approved Services and Accounts The company should designate the generative AI services and account types that employees are permitted to use. Employees should also be prohibited from entering business materials through personal accounts or unapproved services. 2. Prohibited Input Data The company should clearly define the information that must not be entered into generative AI services. This may include resident registration numbers, bank account information, health information, other sensitive or high-risk personal data, trade secrets, non-public contractual terms, and materials relating to litigation or criminal investigations. 3. Approval Procedures for High-Risk Documents High-risk materials, such as contracts, human resources documents, and customer consultation records, may be made subject to prior review or approval by the responsible department. 4. Standards for Removing or Replacing Identifying Information Businesses should establish standards for removing or replacing information that could identify an individual or a transaction party, including names, contact details, company names, and transaction amounts. Rather than uploading an entire contract, employees should extract only the clauses required for the relevant task. Actual customer information may also be replaced with fictional names or sample data. 5. Conversation History and Model-Training Settings The company should determine whether the service allows input data to be excluded from model training, whether conversation history can be disabled, and how deletion features operate. 6. Internal Reporting and Incident Response Employees should be required to report promptly if personal data or confidential business information is entered into an AI service by mistake. The company should also establish procedures for deleting records, disabling external integrations, requesting deletion from the service provider, and taking any other necessary measures. What Should a Business Do If Customer Information Has Already Been Entered? If an employee mistakenly enters customer information or an internal document into a generative AI service, the company should first stop any further sharing or use of the resulting output. The following matters should then be reviewed: ▪️ Which account and AI service were used ▪️ What personal data or confidential information was entered ▪️ Whether the conversation and uploaded files can be deleted ▪️ Whether the service was connected to any external applications ▪️ Whether the information may have been used for training or service improvement ▪️ Whether a third party may have gained access to the information Where necessary, the company should delete the conversation history and uploaded files, revoke external access permissions, and request that the service provider stop processing or delete the relevant information. Whether the incident requires a personal data breach report or notification to affected individuals should be determined by considering the type and volume of information involved, the possibility of third-party access, whether the data has been deleted, and the potential harm to the individuals concerned. Effective Generative AI Use Requires Governance, Not Just Prohibition Generative AI can improve efficiency in contract review, document drafting, and customer communications. However, when its use is left entirely to individual employees, a business may have little control over where customer information and internal documents are transmitted or how they are subsequently used. Businesses should establish specific rules regarding approved services, prohibited data, the removal or replacement of identifying information, approval procedures for high-risk documents, and incident response. Decent Law Firm advises businesses on the legal use of generative AI, including compliance with Korean personal data protection requirements, review of service terms and data-processing agreements, overseas data transfers, trade secret protection, and the preparation of internal AI-use policies. This content is provided for general informational purposes only and does not constitute legal advice regarding any specific matter or business.
2026-07-24 -
Blogs Labor · Employment Disputes
Workplace Harassment Lawyer: Why You Need to Act Before It's Too Late
What Does Workplace Harassment Mean Under the Law? Under Korea's Labor Standards Act, workplace harassment refers to conduct in which an employer or employee uses a position or relationship of superiority in the workplace to inflict physical or mental suffering on another employee, or to worsen the working environment, beyond the appropriate scope of work. Verbal abuse, ostracism, and unfair exclusion from work all qualify as harassment Employers must investigate promptly upon receiving a report Retaliating against a reporting employee carries a penalty of up to 3 years in prison or a fine of up to KRW 30 million Because the legal requirements and procedures are clearly defined, it is important to work with an attorney experienced in workplace harassment cases to organize the facts of your situation. From Reporting to Remedy: What Is the Process? Internal report — Filed with the HR department or a reporting center Fact-finding investigation — Conducted objectively by the employer Corrective action — Disciplinary measures against the perpetrator, workplace reassignment, etc. Complaint to the Ministry of Employment and Labor — Can be filed separately from an internal report, or if the employer's response is inadequate Damages claim — A civil lawsuit can be pursued alongside, if necessary Since early evidence collection and how you respond during questioning can determine the outcome, it is advantageous to seek legal assistance from the very start of the investigation. A Real Case: How a Workplace Harassment Case Was Resolved [Case We Handled] Ms. B, an employee in her twenties, endured ongoing verbal abuse and exclusion from work by a superior, but felt discouraged when the company's investigation turned out to be superficial. With the help of Decent Law Firm, she systematically organized recorded conversations and messenger records and filed a complaint with the Ministry of Employment and Labor, ultimately securing disciplinary action against the perpetrator and improvements to the working environment. As this case shows, the outcome of a workplace harassment case can vary greatly depending on how the evidence is organized and how the process is handled. Why You Should Work With Decent Law Firm Workplace harassment cases require the following areas of professional support: Protecting employee rights during the internal investigation process Preparing complaint and remedy application documents for the Ministry of Employment and Labor Developing a strategy for damages claims Drawing on extensive experience handling workplace harassment cases, Decent closely analyzes each client's situation and works alongside them systematically from the reporting stage through to final resolution. Workplace harassment is a classic example of a case where securing evidence becomes more difficult as time passes. If you are already experiencing harassment or considering filing a report, we encourage you not to make the decision alone, but to first calmly review the facts with an experienced professional. Decent is always ready to provide prompt, accurate consultations and help you find the best path forward for your situation.
2026-07-23 Naver Blog -
Blogs Criminal
Fraud Charges Under Korean Law: How You Could Become a Convict Overnight
What Are the Legal Requirements for Fraud Under Korean Law? Fraud under Korean law is defined by Article 347 of the Criminal Act, and all four of the following elements must be satisfied for a fraud charge to be established. Deceptive act — deceiving the other party (including not only affirmative lies but also omissions that conceal facts) Mistake and disposition of property — the deception causes the other party to fall into a mistaken belief and dispose of property Causation — a causal relationship must exist between the deceptive act and the disposition of property Intent to defraud — the intent to obtain property or a proprietary benefit through the deceptive act Simply failing to repay money does not, by itself, satisfy the legal requirements for fraud. The key question is whether the person lacked the intention or ability to repay at the time of the transaction. What Is the Process, From Investigation to Trial? Whether the legal requirements for fraud are met is typically determined through the following process. 1) Filing a criminal complaint — the investigation begins when the victim files a complaint 2) Questioning of the parties — the circumstances of the transaction, use of funds, and ability to repay are examined 3) Gathering evidence — contracts, text messages, and account records are used to prove intent 4) Referral to the prosecution and indictment decision — the key issue is whether intent to defraud is recognized 5) Trial proceedings — the court makes a final determination on whether the legal requirements for fraud are met Because the circumstances surrounding the transaction and the flow of funds at the time largely determine the outcome, anyone who has been accused should respond carefully from the very beginning. A Real Case: How the Elements of Fraud Were Assessed [Case We Handled] Mr. B, a small business owner, borrowed money from an acquaintance because he urgently needed business funds, but was unable to repay it after a sudden drop in sales and was accused of fraud. With the help of Decent Law Firm, however, he was able to demonstrate — through his business ledgers, records of legitimate transactions, and evidence of efforts to repay at the time of borrowing — that he never had the intent to defraud, and the case ultimately ended in a non-indictment decision. As this shows, if intent to defraud cannot be established, the matter remains a civil default and does not become subject to criminal punishment. The Role of Defense Counsel, and Why You Should Work With Decent Cases involving disputes over the legal requirements for fraud call for the following professional response. Legal analysis of the circumstances of the transaction and the flow of funds Gathering objective evidence to prove the absence of intent to defraud Developing a statement strategy for each stage of the investigation Drawing on its experience handling numerous fraud cases, Decent Law Firm closely analyzes each client's transaction history and builds a systematic defense strategy from the early stages of the investigation through trial. We stand by our clients from beginning to end, so that those wrongly accused of fraud are not unfairly disadvantaged. Whether the legal requirements for fraud are met can vary greatly depending on the facts and how the evidence is interpreted. If you have already been accused or are facing an investigation, we recommend consulting with an attorney experienced in criminal cases rather than trying to assess the situation on your own. Decent is always ready to provide prompt, accurate legal advice and help you find the best direction for your specific situation.
2026-07-22 Naver Blog -
Blogs Corporate & Biz
Korea’s AI Basic Act Six Months On: Disclosure and Labeling Duties for Generative AI Businesses
Korea’s AI Basic Act took effect on January 22, 2026. Under the Act, businesses that provide generative AI products or services are subject to transparency obligations. Compliance, however, does not end with adding a notice to a service screen. The applicable legal risks depend on the AI model used, the information entered by users, where that information is transferred, and how the generated output is used. Advance Disclosure and Output Labeling Are Separate Obligations Article 31 of the AI Basic Act divides transparency obligations into two categories. First, an AI business operator intending to provide a product or service based on generative AI must inform users of that fact in advance. Second, when generative AI or an AI-powered service produces content, the business must indicate that the output was generated using AI. For example, a chatbot or AI document-generation service may need to disclose its use of generative AI through its terms of service or user interface before the service is used. Separately, text, images, audio, or video generated by the service may require an AI-generated content label. Synthetic audio, images, and video that could easily be mistaken for real content require particularly clear disclosure. In practical terms: Before use: disclose that the product or service uses generative AI. After generation: indicate that the resulting content was generated using AI. AI-Generated Content Does Not Always Require a Visible Watermark The required label does not necessarily have to be a visible watermark. The Enforcement Decree permits both: ▪️ Human-readable labeling ▪️ Machine-readable labeling Where only a machine-readable method is used, users must still be informed at least once, through text, audio, or another accessible method, that the content was generated using AI. All or part of the disclosure and labeling requirements may not apply where: ▪️ The service name or interface already makes the use of AI obvious ▪️ The AI is used exclusively for the operator’s internal business purposes ▪️ A separately issued government notice recognizes an exception The internal-use exception should be applied carefully. Materials initially generated for internal use may fall outside the exception once they are included in advertisements, customer reports, consultation materials, or other externally distributed content. Businesses should therefore distinguish between outputs that remain within the service and outputs that can be downloaded, shared, or provided to customers. Businesses Using External AI APIs May Also Be Covered A business does not need to develop its own AI model to fall within the scope of the AI Basic Act. The Act also covers businesses that use AI developed by another provider to offer AI products or services. A company may therefore qualify as an AI business operator where it connects an external large language model through an API and provides services such as: ▪️ AI chatbots ▪️ Image-generation tools ▪️ Document drafting or summarization ▪️ Automated customer consultation The key question is not who developed the underlying model. What matters is whether the company uses AI to provide a product or service to users. Businesses using third-party APIs should therefore review whether they are subject to advance disclosure and AI-output labeling obligations. Disclosure Compliance Is Only One Part of the Legal Review Generative AI services commonly send user inputs to an external AI model and return generated outputs to the user. This process may raise data protection and copyright issues that are legally separate from the labeling requirements under the AI Basic Act. 1. Personal Data Entered into AI Services Where customers or employees enter names, consultation records, contracts, photographs, or internal documents into an external AI service, the business should verify: ▪️ Whether input data is stored or used for model training ▪️ The location and country of the servers processing the data ▪️ Applicable retention periods and deletion procedures ▪️ Whether the arrangement constitutes outsourcing, third-party provision, or overseas transfer ▪️ Whether the data is retransmitted to plug-ins or other external services The legal classification should be based on the actual data flow rather than the name of the agreement with the AI provider. A privacy policy should accurately reflect how personal data is collected, transferred, retained, and deleted throughout the AI service structure. 2. Copyright in AI-Generated Outputs A business does not automatically acquire exclusive copyright merely because an image, document, video, or source code was generated using AI. Relevant considerations include: ▪️ The degree of human creative involvement ▪️ Whether the source materials were lawfully used ▪️ Whether the AI provider’s terms permit commercial use ▪️ Whether the output is substantially similar to existing protected works AI-generated content may also infringe third-party copyrights, image rights, or other intellectual property rights. Businesses using generated outputs for advertising, websites, software, games, or commercial publications should retain records of the model used, prompts, initial outputs, and subsequent human edits. AI Used to Evaluate Individuals May Qualify as High-Impact AI Not every generative AI service is classified as high-impact AI. However, additional review may be required where AI is used beyond basic drafting or guidance and affects a person’s rights, opportunities, or access to essential services. Relevant examples include AI used in: ▪️ Recruitment and applicant evaluation ▪️ Lending, credit scoring, and insurance assessment ▪️ Medical diagnosis or treatment-related decision-making ▪️ Student admission, selection, or performance evaluation For instance, an AI tool that summarizes a résumé may present a different level of legal risk from one that calculates an applicant’s probability of being hired. The assessment depends on how the AI output is used in the actual decision-making process. Where a system qualifies as high-impact AI, the operator may need to implement: ▪️ Risk-management measures ▪️ Procedures for explaining major decision-making criteria ▪️ User-protection procedures ▪️ Human management and oversight ▪️ Preparation and retention of relevant records Documents to Review Before Launching a Generative AI Service Legal review should not begin by drafting a disclaimer in isolation. A business should first map: ▪️ The AI model being used ▪️ The information entered by users ▪️ The data-transfer route ▪️ How generated outputs are used ▪️ Where human review takes place The following documents should then be aligned with the actual service structure. AI Disclosure and Labeling Notices Separate advance disclosure before use from labeling of generated outputs. Terms of Service Define the permitted use of AI outputs and procedures for handling errors, rights infringement, and user complaints. Privacy Policy Reflect the actual collection, processing, storage, overseas transfer, and deletion of personal data involving external AI providers. AI Supply Agreements and API Terms Review provisions concerning data use, cybersecurity incidents, intellectual property, service interruptions, and liability allocation. Internal AI Use Policy Establish restrictions and approval procedures for entering customer data, contracts, source code, and confidential business information into AI tools. Legal Review Based on the Actual AI Service Structure Under Korea’s AI Basic Act, generative AI transparency obligations are divided into advance disclosure before use and labeling of AI-generated outputs. In practice, however, legal risk extends beyond how a notice is displayed. Businesses should also review the use of external AI models, personal data processing and overseas transfers, rights in generated content, potential classification as high-impact AI, and the allocation of liability with AI vendors. Decent Law Firm’s Corporate Practice Group advises AI and technology companies based on their actual service functions and data flows. Our review covers the applicability of the AI Basic Act, disclosure and labeling design, privacy and copyright issues, external AI model agreements, and the legal documentation required for launching and operating AI services in Korea. This content is provided for general informational purposes only and does not constitute legal advice for any individual matter.
2026-07-22 -
Blogs Criminal
Police Investigation Lawyer Consultation: Why You Shouldn't Face It Alone
Why You Need a Police Investigation Lawyer Consultation A police interrogation is the first step in any criminal proceeding. Statements and responses made at this stage directly affect what follows — referral to the prosecution, whether charges are filed, and even the outcome of trial. Even if a defendant later denies the content, statements made during a police interrogation can be brought before the court through testimony from the investigating officer (so-called "investigator testimony"), and can be compared against later statements made during prosecutorial questioning or trial, affecting how credible those later statements appear. Suspects and witnesses ("reference witnesses") have different legal status and rights, so how you respond must differ accordingly. In particular, even when investigators formally question someone as a witness, if that person is substantively a suspect, the right to remain silent must still be guaranteed, and a statement taken without that right having been advised may be found inadmissible as evidence. Defense counsel may participate in a suspect's interrogation (Article 243-2 of the Criminal Procedure Act), raising objections to improper questioning methods and stating opinions to substantively protect the suspect's right of defense, and if investigators refuse defense counsel's participation without justifiable reason, the resulting record may be found inadmissible as evidence. This is why, from the moment you receive a summons to appear, it is critical to accurately understand your status and the nature of the allegations through a police investigation lawyer consultation. From Summons to Referral: How the Process Unfolds Cases requiring a police investigation lawyer consultation generally proceed through the following steps. Summons to appear – notice of an investigation schedule following a criminal complaint/accusation or an investigation initiated on the police's own authority Suspect interrogation – detailed questioning regarding the specific allegations Evidence review – comprehensive examination of statements, witness interviews, seized items, and more Police investigation outcome – referral to the prosecution if the allegations are substantiated, or a non-referral decision if they are not Prosecutorial disposition – for referred cases, review of whether supplementary investigation is needed, followed by a decision on formal indictment, summary indictment, or non-indictment Because how you respond during the initial investigation determines the direction of everything that follows, it's essential to prepare through a police investigation lawyer consultation as soon as you receive a summons. A Real Case: Police Investigation Lawyer Consultation in Action [Case We Handled] Mr. B, a man in his 40s, was suddenly accused following a financial dispute with an acquaintance and received a police summons. Flustered, he initially planned to face the investigation alone, but at his family's urging, he consulted our firm and prepared for the police investigation beforehand. Working with defense counsel to organize his statement and having counsel present during questioning, he was able to clearly establish the facts and ultimately received a non-prosecution decision. This case illustrates how much the outcome of a police investigation lawyer consultation can depend on how early you respond, even before questioning begins. The Lawyer's Role, and Why You Should Choose Decent A police investigation lawyer consultation requires the following areas of professional support. Advance analysis of case records and the specific allegations Guidance on statement strategy through presence during questioning Building a defense strategy that accounts for subsequent proceedings Decent draws on extensive experience handling criminal cases to closely analyze each client's situation and stand beside them from the earliest stage of the investigation. We remain with clients from beginning to end, so that those who feel psychologically vulnerable at the moment they need a police investigation lawyer consultation are not put at a disadvantage. A police investigation lawyer consultation is a textbook example of a matter that becomes harder to handle the more time passes. If you have already received a summons or are facing an upcoming investigation, we recommend consulting an experienced criminal defense lawyer rather than deciding how to proceed on your own. Decent Law Firm is ready at any time to work with you toward the best direction for your situation through prompt and accurate legal consultation.
2026-07-21 -
Blogs Crypto
Korea Refers Approximately 30 Virtual Asset Market Manipulation Cases for Investigation: Key Findings and Legal Risks
The Financial Services Commission and the Financial Supervisory Service have released the results of their first two years of enforcement under Korea’s Virtual Asset User Protection Act. As of July 20, 2026, the authorities had completed investigations into approximately 40 cases and referred or reported around 30 cases to investigative authorities. A total of 25 individuals were identified as suspects, with average alleged unlawful gains of approximately KRW 1.4 billion per case. Enforcement Results Under Korea’s Virtual Asset User Protection Act Korea’s Virtual Asset User Protection Act took effect on July 19, 2024. The Act prohibits unfair trading activities in the virtual asset market, including the misuse of material non-public information, market manipulation, and fraudulent trading practices. Among the approximately 30 cases referred or reported to investigative authorities, most involved suspected market manipulation. The authorities also identified several fraudulent trading cases involving false or misleading information distributed through social media. The key enforcement figures announced by the Korean financial authorities include: ▪️ Approximately 40 investigations completed ▪️ Approximately 30 cases referred or reported to investigative authorities ▪️ 25 individuals identified as suspects ▪️ Average alleged unlawful gains of approximately KRW 1.4 billion per case ▪️ An average of approximately eight virtual assets involved per case A referral or report does not mean that a criminal conviction has been entered. It means that the financial authorities identified suspected violations and transferred the matter to investigative authorities. Some of the announced cases remain under criminal investigation or are currently being tried in court. Market Manipulation Methods Identified by Korean Regulators Manipulating Price-Ranking Systems One method involved concentrating orders at specific times when a trading platform’s price-change rankings were reset. By pushing a virtual asset into the list of top-performing assets, traders could attract additional buying interest and then sell their existing holdings at higher prices. A large purchase made at a particular time does not automatically constitute market manipulation. However, regulators may examine whether the orders were intended to influence rankings, attract other investors, and facilitate the subsequent disposal of previously held assets. Exploiting Temporary Suspension of Deposits and Withdrawals Another method involved taking advantage of situations in which deposits and withdrawals of a particular virtual asset were temporarily suspended on one or more exchanges. When assets cannot be transferred to or from the exchange, the price on that exchange may become temporarily disconnected from prices elsewhere. Traders may attempt to increase the internal exchange price through concentrated purchases and then sell their holdings at the inflated price. A deposit or withdrawal suspension is not itself evidence of misconduct. The legal issue is whether a person deliberately exploited the restricted market environment to create an artificial price and induce trading by other users. High-Frequency and Deceptive Orders Using APIs An application programming interface, or API, allows orders to be submitted automatically through trading software. The authorities identified cases in which API keys and multiple accounts were allegedly used to submit high-frequency buy and sell orders, including orders that were not intended to be genuinely executed. In one case, the authorities found that automated orders and deceptive bids were allegedly used to increase the market price before virtual assets associated with the issuing foundation were sold at higher prices. Using an API or automated trading system is not unlawful by itself. The key question is whether the orders reflected a genuine intention to trade or were designed to create a false impression of market demand and induce other users to buy or sell. False Social Media Statements and Meme Coin Trading The authorities also identified a case in which persons connected to a meme coin allegedly purchased the asset in advance, published false information through social media, and then sold their holdings after additional buyers entered the market. Promoting a virtual asset project, exchange listing, partnership, or business plan is not automatically unlawful. However, publishing nonexistent investment arrangements, partnerships, or development plans as if they were true—and using that information to sell previously acquired assets—may constitute fraudulent trading under Korean law. How Is Legitimate High-Volume Trading Distinguished from Market Manipulation? Purchasing an asset before its price rises and later selling it at a profit does not, by itself, establish market manipulation. Korean financial and investigative authorities generally examine the purpose and overall pattern of the trading activity rather than viewing each order in isolation. Relevant factors may include: ▪️ Whether repeated high-priced purchases or deceptive orders were submitted ▪️ Whether there was a genuine intention to execute the orders ▪️ Whether multiple accounts acted under common instructions ▪️ Whether the accounts were connected to an issuing foundation or major holder ▪️ Whether significant holdings were sold immediately after the price increased ▪️ Whether social media posts were closely connected to the timing of sales ▪️ Whether orders across Korean and overseas exchanges were coordinated Even where accounts or API keys were registered in another person’s name, investigators may examine who actually controlled the trading, who gave the instructions, and who ultimately received the profits. Criminal Penalties and Administrative Surcharges Virtual asset market manipulation and fraudulent trading may result in both criminal penalties and administrative surcharges intended to recover unlawful gains. According to the financial authorities’ announcement, the statutory minimum term of imprisonment increases according to the amount of unlawful gains: ▪️ Less than KRW 500 million: imprisonment for at least one year ▪️ KRW 500 million to less than KRW 5 billion: imprisonment for at least three years ▪️ KRW 5 billion or more: imprisonment for at least five years The actual penalty may vary depending on the conduct involved, the calculation of unlawful gains, the level of participation, and whether additional fines, confiscation, or collection orders are imposed. In the announced enforcement results, administrative surcharges equivalent to approximately 125% to 165% of the unlawful gains were imposed in one fraudulent trading case and one market manipulation case. A market manipulation matter may therefore proceed beyond an exchange account restriction. It may lead to regulatory investigation, referral or reporting to investigative authorities, criminal investigation, prosecution, trial, and a separate administrative surcharge proceeding. AI-Based Monitoring and Future Regulatory Measures Korean financial authorities have introduced AI-based market surveillance and investigation systems capable of conducting real-time monitoring, analyzing orders on a second-by-second basis, and automatically identifying potentially suspicious accounts and trading periods. Korean virtual asset exchanges have also strengthened their continuous monitoring systems. Exchanges may report suspicious trading to financial or investigative authorities and may issue warnings or restrict orders when potentially abusive trading patterns are repeatedly detected. The authorities are also considering whether to include the following measures in the proposed second-stage Digital Asset Act: ▪️ Freezing accounts and financial accounts to prevent the concealment of unlawful gains ▪️ A reporting and reward system for the early detection of unfair virtual asset trading These measures were under consideration at the time of the announcement and should not be treated as fully implemented rules. Responding to a Market Manipulation Investigation in Korea A person who receives an account restriction or a request for an explanation from a Korean virtual asset exchange should first identify the specific orders and trading periods under review. Where automated trading or market-making activities were conducted, relevant evidence may include: ▪️ Order, execution, and API usage records ▪️ Automated trading settings and documented trading strategies ▪️ The relationship between the registered account holder and the actual operator ▪️ Communications with the issuing foundation or major asset holders ▪️ Transfers between personal wallets and virtual asset exchanges ▪️ The basis and circumstances for social media statements ▪️ Records showing how trading profits were received and distributed Automated trading or high-volume trading does not automatically establish market manipulation. However, simply stating that the activity was a legitimate investment may not be sufficient. The trading purpose, genuine intention to execute orders, relationship between accounts, and ultimate recipient of the profits should be explained through objective records. Decent Law Firm advises clients on exchange inquiries, investigations by Korean financial authorities, police and prosecution proceedings, and criminal trials involving alleged virtual asset market manipulation and fraudulent trading. This content is provided for general informational purposes only and does not constitute legal advice for any individual matter.
2026-07-21 -
Blogs Criminal
Korea’s Suspicious Account Transaction Freeze System: What Scam Victims and Account Holders Need to Know
Since June 30, 2026, financial institutions in Korea have been able to promptly restrict transactions involving accounts suspected of being used in emerging phishing schemes, including no-show scams and romance scams. Victims should report the incident before the funds are transferred elsewhere. At the same time, an account holder whose account has been frozen despite receiving legitimate payment must be prepared to prove the underlying transaction with objective evidence. What Is the Suspicious Account Transaction Freeze System? Korea’s 「Special Act on the Prevention of Loss Caused by Telecommunications-Based Financial Fraud and Refund for Losses」 provides procedures for freezing accounts used in voice phishing schemes and refunding eligible victims. However, fraudulent schemes disguised as ordinary transactions involving goods or services have generally fallen outside the scope of the conventional voice phishing refund framework. This created practical difficulties in promptly restricting accounts used in scams presented as product purchases, investments, or service transactions. To address this issue, the Financial Services Commission, the Korea Financial Intelligence Unit, and the National Police Agency introduced a system on June 30, 2026, allowing suspicious accounts linked to emerging phishing schemes to be temporarily restricted through existing customer due diligence procedures. Once an account is identified as potentially connected to such a scheme, the financial institution may classify the account holder as subject to enhanced customer due diligence under the 「Act on Reporting and Using Specified Financial Transaction Information」 and restrict incoming and outgoing transactions. What Types of Scams May Be Covered? The system may apply to various forms of emerging phishing fraud, including the following. ▪️No-Show Scams A fraudster impersonates a public institution or corporate buyer, promises a large order, and instructs the victim to purchase goods or materials from a designated supplier. ▪️Romance Scams A fraudster builds a personal relationship through social media or messaging applications and later requests money for investments, business expenses, customs charges, medical costs, or similar reasons. ▪️Investment Scams A fraudster promises profits from stocks, virtual assets, overseas futures, or other investments, receives funds from the victim, and then blocks withdrawals or demands additional payments. However, an account is not automatically frozen simply because money was transferred and a dispute later arose. Authorities must distinguish between an ordinary contractual dispute and conduct involving deception through telecommunications and circumstances indicating possible fraud. Financial institutions and the police may review transaction records, communications, the method used by the suspected offender, and whether the promised goods or services were actually provided. How Does the Transaction Freeze Process Work? 1. Victim Report and Temporary Action by the Financial Institution A person who suspects that they have been targeted by an emerging phishing scam should immediately report the matter by calling 112 or visiting a nearby police station in Korea. A financial institution may take temporary action when it identifies a suspicious transaction through its fraud detection system or receives a report from the victim or the police. The account may therefore be temporarily restricted before the authorities have conclusively determined whether the case involves conventional voice phishing or another form of emerging phishing fraud. 2. Police Review of the Fraud Type The National Police Agency’s Integrated Response Center for Telecommunications Financial Fraud reviews whether the transaction involved a genuine sale of goods or services and examines the specific method used by the suspected offender. When the case is classified as conventional voice phishing, the existing account freeze and victim refund procedures under the telecommunications financial fraud legislation may apply. When the case is classified as an emerging phishing scheme, the relevant account may instead be placed under enhanced customer due diligence procedures. 3. Temporary Transaction Freeze for Seven Business Days Once the account is identified as being connected to an emerging phishing scheme, the financial institution may temporarily restrict both incoming and outgoing transactions. The Korea Financial Intelligence Unit then reviews the transaction history and the relationship between the victim and the account holder within seven business days of receiving the report. 4. Additional Freeze of Up to 60 Business Days When the Korea Financial Intelligence Unit determines that the restriction should remain in place, the financial institution may continue the freeze for an additional 30 business days after the initial seven-business-day period. At the request of the police, the restriction may be extended once for another 30 business days. During this period, the police may investigate the account’s connection to the suspected crime and trace the movement of funds. An Account Freeze Does Not Automatically Guarantee a Refund A suspicious account transaction freeze is intended to prevent funds from being transferred out of an account believed to have been used in a fraudulent scheme. It does not mean that the victim is automatically entitled to an immediate or full refund. In conventional voice phishing cases, the statutory process for extinguishing the account balance and refunding eligible victims may apply. By contrast, a transaction freeze involving an emerging phishing scheme relies on customer due diligence measures under Korea’s financial transaction reporting legislation. It therefore operates differently from the statutory refund process applicable to conventional voice phishing cases. The method and likelihood of recovery may depend on factors including: ▪️The amount remaining in the account ▪️The number of victims ▪️The nature of the suspected fraud ▪️The outcome of the criminal investigation ▪️Whether the account holder or another participant received or transferred the funds Depending on the circumstances, the victim may need to file a criminal complaint and separately consider a civil claim for unjust enrichment or damages against the account holder or the persons who participated in the fraud. Evidence Victims Should Preserve Delays in reporting may allow the funds to be transferred through multiple accounts, converted into cash, or exchanged for virtual assets. Rather than continuing to negotiate with the suspected offender, the victim should first consider reporting the matter and requesting that the relevant account be restricted. Important evidence may include: ▪️Bank transfer receipts, transfer dates, account numbers, and account holder names ▪️Text messages and conversations through KakaoTalk, Telegram, or other messaging services ▪️Screenshots of investment or trading platforms ▪️Requests for additional deposits, fees, or taxes ▪️Contracts, purchase orders, quotations, and business registration information ▪️Telephone numbers, social media accounts, and original files provided by the suspected offender Leaving a chatroom or replacing a mobile phone may make it difficult to preserve the original evidence. Victims should retain not only screenshots but also exported chat records, attachments, and original electronic files where possible. What If a Legitimate Business Account Is Frozen? A business may receive genuine payment for goods or services but still have its account reported as suspicious because the payment is connected to a broader fraudulent fund flow. Even when the underlying transaction was legitimate, restrictions on a business account may significantly affect payroll, supplier payments, and ordinary business operations. The account holder may raise an objection with the relevant financial institution or contact the National Police Agency’s Integrated Response Center for Telecommunications Financial Fraud at 1394. If the police determine that the account is unlikely to be connected to criminal activity, they may request that the financial institution lift the transaction restriction. A general statement that the payment came from a legitimate transaction may not be sufficient. The account holder should provide objective evidence demonstrating the commercial basis for receiving the funds. Relevant materials may include: ▪️Contracts and purchase orders ▪️Tax invoices, receipts, and payment records ▪️Delivery and receipt records ▪️Evidence showing that services were actually performed ▪️Communications with the customer or counterparty ▪️Records showing how the received funds were used ▪️Evidence explaining repeated or similar transactions If the account, debit card, password, or another means of account access was transferred or rented to another person, the matter may go beyond a simple transaction freeze and raise issues under Korea’s Electronic Financial Transactions Act. Similarly, withdrawing cash or transferring funds while knowing that the money was connected to a fraudulent scheme may result in an investigation for aiding and abetting fraud. The account holder should therefore organize the facts and supporting evidence from the earliest stage. Key Points for Responding to a Suspicious Account Freeze Victims of emerging phishing scams should report the incident promptly and preserve all transaction records and communications before the funds are transferred elsewhere. A person or business whose account has been frozen despite receiving legitimate payment should demonstrate the substance of the transaction and the lawful basis for receiving the funds through contracts, invoices, delivery records, and other objective evidence. Decent Law Firm assists clients with criminal complaints arising from emerging phishing scams, reviews potential avenues for recovering transferred funds, and advises account holders on objections to transaction freezes and related criminal investigations. This content is provided for general informational purposes only and does not constitute legal advice for any individual matter.
2026-07-20 -
Blogs Crypto
South Korea Expands Voice-Phishing Refund Protection to Crypto Assets from October 2026
Until now, victims often faced difficulties when money stolen through voice phishing was converted into Bitcoin, USDT, or another crypto asset before the relevant account could be frozen. This is expected to change from October 2026. South Korea is expanding its telecommunications financial fraud refund framework so that crypto assets can also be subject to account-freezing and victim-refund procedures. On July 15, 2026, the Financial Services Commission announced a proposed amendment to the Enforcement Decree setting out how crypto assets will be returned, valued, and, where necessary, sold on behalf of victims. Crypto Assets Will Be Included in the Voice-Phishing Refund Framework South Korea’s existing voice-phishing refund system has primarily focused on money remaining in bank accounts. This created a practical gap. Even where stolen funds could be traced to a crypto exchange account, the existing statutory process was not always able to deal effectively with assets that had already been converted into cryptocurrency. To address this issue, legislation promulgated on March 31, 2026 expanded the scope of recoverable assets from money to crypto assets. As a result, the revised framework may apply to cases such as: ▪️ A victim purchasing and transferring crypto assets at the direction of a voice-phishing operation ▪️ Korean won transferred by a victim being converted into Bitcoin, USDT, or another crypto asset ▪️ Stolen crypto assets remaining in an account subject to the revised refund framework The amended law is scheduled to take effect on October 1, 2026. What Happens If the Stolen Money Has Already Been Converted into Crypto? One of the most important parts of the proposed Enforcement Decree concerns the form in which the victim will receive the recovered assets. Where the recoverable asset is money, it will be returned as a monetary amount. Where it is a crypto asset, it will generally be returned according to the type and quantity of that asset. However, the asset originally transferred by the victim may be different from the asset remaining in the fraudulent account when the account is frozen. In that situation, the victim will generally receive the asset that actually remains in the account at the time of the freeze. For example, suppose a victim transfers KRW 10 million and the perpetrators convert the money into USDT. If the relevant account is frozen while the USDT is still there, the refund may be made based on the remaining USDT rather than the original amount of Korean won. Crypto Assets Will Be Valued at the Time of the Account Freeze A fraudulent account may contain a mixture of Korean won and several types of crypto assets. Where different forms of property are mixed together, the proposed rules provide that: ▪️ Money will be valued according to its monetary amount ▪️ Crypto assets will be valued according to their market price at the time of the account freeze This timing matters. The relevant price is not necessarily the price when the victim made the transfer or when the refund is eventually paid. Instead, the valuation is based on the market price when the freeze took effect. Because crypto prices can change rapidly, a prompt report to the police, financial institution, and relevant crypto exchange may be important not only for preventing further transfers, but also for determining the value of the recoverable assets. Victims May Receive Cash Through a Crypto Sale Support Institution Receiving crypto assets directly may not be practical for every victim. A victim may have no experience trading crypto, may not have an exchange account, or may not know how to sell and withdraw the asset in Korean won. The proposed Enforcement Decree therefore introduces requirements for institutions that may support the sale of recoverable crypto assets. Where a victim has difficulty disposing of the crypto directly, a designated institution may sell the asset and pay the proceeds to the victim in cash. To qualify, the institution must have the organization and personnel necessary to support crypto users and assist with victim recovery. The designated institution and the detailed application procedure will need to be confirmed once the final rules and administrative guidance are issued. Not Every Crypto Scam Will Qualify for a Refund The expanded framework does not mean that every crypto-related loss will automatically be refunded. The case must first fall within the statutory definition of telecommunications-based financial fraud. Ordinary investment losses, failed private transactions, and contractual disputes are not automatically treated as voice-phishing cases. Investment advisory scams and romance scams may also require a closer review of: ▪️ How the victim was deceived ▪️ Why the money or crypto was transferred ▪️ Whether the transaction formed part of a telecommunications-based fraud scheme ▪️ Where the assets were located when the freeze was requested The refund system is also not a government guarantee covering the victim’s entire loss. Assets must generally remain in the relevant fraudulent account when the freeze takes effect. Where the remaining assets belong to multiple victims, the actual refund may depend on the amount left and the scale of each victim’s loss. If the crypto has already been transferred to a private wallet or an overseas exchange, separate measures may be required, including a criminal complaint, wallet tracing, transaction analysis, and preservation requests directed to relevant exchanges. Information Victims Should Preserve Immediately Crypto assets can move rapidly through multiple wallets and exchanges. Early action is therefore critical. A victim should promptly contact the police, the bank used for the transfer, and the relevant crypto exchange to determine whether the account or asset can be frozen. The following records should also be preserved: ▪️ Messages exchanged with the perpetrators ▪️ Call recordings and telephone numbers ▪️ Bank transfer confirmations ▪️ Crypto purchase and transfer records ▪️ Sending and receiving wallet addresses ▪️ Transaction IDs, also known as TXIDs ▪️ Information identifying the exchange and user account involved Bank records alone may not reveal the full movement of the assets. It is often necessary to organize the entire transaction history chronologically, from the original payment through the purchase and transfer of the crypto assets. How Decent Law Firm Can Assist Decent Law Firm’s Virtual Asset Practice reviews the transaction structure and movement of funds in crypto-related voice-phishing cases. Depending on the circumstances, our assistance may include: ▪️ Preparing materials for submission to Korean investigative authorities ▪️ Coordinating responses involving banks and crypto exchanges ▪️ Organizing wallet addresses, TXIDs, and transaction records ▪️ Assessing whether the statutory refund procedure may apply ▪️ Preparing a criminal complaint and related asset-recovery measures Cases involving multiple wallets, private wallets, or overseas exchanges may require the statutory refund process to be combined with separate criminal and asset-tracing strategies. The proposed Enforcement Decree is open for public comment from July 15 to August 24, 2026, and is scheduled to take effect together with the amended law on October 1, 2026. As the rules have not yet been finalized, some details and procedures may change before implementation.
2026-07-16 -
Blogs Criminal
Repeat DUI Offenses in Korea: What to Check Immediately After a Nighttime or Weekend Traffic Stop
Driving under the influence cases in Korea often begin unexpectedly late at night, early in the morning, or over the weekend. For a person who has previously been convicted of a DUI-related offense, the potential consequences cannot be assessed solely by counting the number of prior incidents. The date on which the previous sentence became final, the blood alcohol concentration in the current case, whether an accident occurred, and the circumstances surrounding the alcohol test must all be reviewed. Statements made immediately after a traffic stop may later be compared with credit card records, CCTV footage, vehicle black box recordings, and other objective evidence. It is therefore important to avoid guessing about facts that are not clearly remembered and to preserve relevant evidence as early as possible. Key Points ▪️“Habitual drunk driving” is not a separate criminal offense under Korean law. It is a general term commonly used to describe repeated DUI conduct. ▪️Enhanced punishment may apply when a person commits another DUI-related offense within 10 years from the date a previous fine or more severe sentence became final. ▪️A repeat DUI case is assessed based on the previous conviction date, blood alcohol concentration, driving distance, accident history, refusal or obstruction of alcohol testing, and whether the new offense occurred during a suspended sentence. ▪️Alcohol test results, payment records, designated-driver call history, vehicle black box footage, and previous court records should be secured promptly. How Many DUI Offenses Are Considered “Habitual Drunk Driving”? Korean law does not define habitual drunk driving as an independent criminal charge based on a fixed number of offenses. Instead, the police, prosecutors, and courts consider the overall circumstances of the case, including: ▪️The date and details of previous DUI convictions ▪️The blood alcohol concentration in the current case ▪️The length of time between the previous conviction and the new offense ▪️The distance driven and the reasons for driving ▪️Whether a personal injury or property damage accident occurred ▪️Whether the driver refused or interfered with alcohol testing ▪️Whether the offense occurred during a suspended sentence or repeat-offender period A person should therefore not assume the likely punishment based only on how many times they remember being stopped for drunk driving. Enhanced Punishment for Repeat DUI Offenses Under Article 148-2 of the Korean Road Traffic Act, enhanced penalties may apply when a person who previously received a fine or more severe punishment for drunk driving, refusal of alcohol testing, or obstruction of alcohol testing commits another relevant offense within 10 years from the date the previous sentence became final. The applicable statutory penalties depend on the blood alcohol concentration. ▪️Blood alcohol concentration of at least 0.03% but below 0.2% Imprisonment for one to five years or a fine of KRW 5 million to KRW 20 million ▪️Blood alcohol concentration of 0.2% or higher Imprisonment for two to six years or a fine of KRW 10 million to KRW 30 million ▪️Repeat refusal or obstruction of alcohol testing Imprisonment for one to six years or a fine of KRW 5 million to KRW 30 million These are the statutory sentencing ranges. The actual sentence may vary depending on the timing and seriousness of previous offenses, the distance driven, whether an accident occurred, efforts to compensate victims, and measures taken to prevent another offense. Why Immediate Action Matters After a Nighttime DUI Stop A DUI investigation does not begin only when the driver attends a formal police interview. Information collected at the roadside may become part of the investigation from the moment the traffic stop occurs. The police may ask about: ▪️The amount of alcohol consumed ▪️The time drinking began and ended ▪️The time the person started driving ▪️The distance driven ▪️Whether an accident occurred ▪️Why a designated driver or alternative transportation was not used When a driver provides an estimated or speculative answer, the statement may later conflict with restaurant payment records, CCTV footage, telephone records, navigation history, or vehicle black box footage. In repeat-offense cases, it is particularly important to confirm the date on which the previous criminal sentence became final. The relevant date is not necessarily the date of the previous traffic stop or even the date of the judgment. Evidence to Secure After a DUI Stop The following materials should be preserved as soon as possible: ▪️Blood alcohol concentration results and the time of testing ▪️Restaurant, bar, or convenience store payment records ▪️The route taken before and during the drive ▪️Designated-driver call and cancellation records ▪️Telephone calls and text messages ▪️Vehicle black box footage ▪️The location of nearby CCTV cameras ▪️Previous DUI judgments and disposition records ▪️The police interview date and the investigating officer’s contact information Vehicle black box and CCTV footage may be automatically deleted or overwritten. Delayed evidence collection can therefore make it more difficult to verify the actual driving route and timeline. Conduct to Avoid After a DUI Stop A person should not change the amount of alcohol consumed, the time of drinking, or the driving timeline in an attempt to reduce the expected punishment. Inconsistent statements may cause the police or prosecution to question the credibility of the entire explanation. When a fact is not clearly remembered, it is generally preferable to review objective records before making a definite statement. A driver must also not consume additional alcohol or use substances for the purpose of interfering with the calculation or measurement of blood alcohol concentration. Such conduct may constitute a separate offense of obstructing alcohol testing under Korean law. Even where the driver intends to admit the DUI offense, attending a police interview without reviewing the relevant facts and documents may create additional risks. Statements concerning previous convictions, the reasons for driving, and the events leading to the traffic stop may later be considered in determining the sentence. Situations Requiring Early Legal Review Early legal advice may be particularly important in the following circumstances: ▪️The driver has a DUI conviction that became final within the previous 10 years ▪️Multiple DUI offenses occurred within a relatively short period ▪️The new offense occurred during a suspended sentence ▪️The blood alcohol concentration was particularly high ▪️A personal injury or property damage accident occurred ▪️The driver left the scene or is being investigated for failure to take necessary measures after an accident ▪️The driver refused an alcohol test ▪️The police allege that the driver interfered with alcohol testing ▪️The roadside statement differs from the actual sequence of events ▪️The driver is uncertain about the date or details of a previous conviction Where the previous criminal record is unclear, the relevant judgment and final conviction date should be confirmed before estimating the likely consequences of the new case. Preparing for a Police Interview in Korea During a police interview, the investigator may ask detailed questions beyond whether the driver admits operating a vehicle after drinking. Before attending the interview, the following matters should be organized: ▪️When and where the drinking took place ▪️The approximate amount of alcohol consumed ▪️Why the person decided to drive ▪️The time and distance of the drive ▪️Whether an accident occurred ▪️Whether any victim has been compensated ▪️Why a designated driver or public transportation was not used ▪️Details of previous DUI convictions ▪️The driver’s occupation and need to use a vehicle ▪️Specific measures taken to prevent another DUI offense Any explanation or sentencing material should be based on truthful and verifiable facts. Submitting exaggerated, inaccurate, or purely formal documents may undermine the credibility of the defense. Nighttime and Weekend DUI Assistance Decent Law Firm’s 24/7 Criminal Defense Team accepts urgent consultations involving repeat DUI offenses, nighttime traffic stops, and weekend police investigations. Our legal review may include: ▪️Confirming previous DUI convictions and final judgment dates ▪️Reviewing the blood alcohol concentration and testing procedure ▪️Examining whether an accident, departure from the scene, or test refusal is involved ▪️Preserving black box, CCTV, and payment records ▪️Preparing for the police interview ▪️Reviewing statements and written submissions ▪️Preparing mitigating evidence and recurrence-prevention materials ▪️Responding to criminal penalties and driver’s license sanctions A foreign national who is currently at a police station or has recently returned home after a late-night traffic stop should not simply wait for the formal interview date. The previous criminal record, roadside statements, immigration status, and available evidence may need to be reviewed from the beginning. Decent Law Firm provides legal assistance throughout each stage of the matter, including the initial police investigation, prosecution, criminal trial, administrative appeal, and litigation concerning the suspension or cancellation of a Korean driver’s license. This content is provided for general informational purposes only and does not constitute legal advice for any specific case.
2026-07-15 -
Blogs Crypto
The CATFI Rug Pull Case and Unfair Trading Under Korea’s Virtual Asset User Protection Act
Meme coins often attract investors because they can be launched relatively quickly and may experience sharp price increases within a short period. Decentralized exchanges, or DEXs, facilitate trades through smart contracts and automated protocols rather than a centralized order-matching system. Once a token has been issued, trading can begin by creating a liquidity pool without going through the formal listing review typically required by a centralized exchange. This structure can attract investors seeking early exposure to newly launched tokens. At the same time, there has been growing concern over so-called rug pulls, in which project operators use false or misleading information to drive up the price of a token and then sell their holdings all at once. In May 2026, the Seoul Southern District Prosecutors’ Office indicted individuals involved in the issuance of the meme coin CATFI on charges including violations of Korea’s Act on the Protection of Virtual Asset Users. Prosecutors alleged that the defendants circulated false positive announcements, manipulated the token’s trading activity, and obtained unlawful profits. The case was the first in which prosecutors applied the Act’s provisions on fraudulent unfair trading. This article examines the laws that may apply to rug pulls and the key legal issues arising from such cases. Laws That May Apply to Rug Pull Schemes A rug pull is not a separately defined criminal offense under Korean law. Depending on how the scheme was structured, several provisions may apply. Where false disclosures, artificial trading activity, or market manipulation are involved, Article 10 of the Act on the Protection of Virtual Asset Users, which prohibits unfair trading practices, may become relevant. Category Main Conduct Relevant Provision Use of material non-public information A virtual asset service provider, issuer, or other relevant party uses undisclosed material information for trading Article 10(1) Market manipulation through matched or wash trades Parties coordinate transactions in advance or conduct trades without a genuine transfer of economic ownership Article 10(2) Market manipulation through actual trades Trades are carried out to induce others to buy or sell by artificially moving the market price Article 10(3) Fraudulent unfair trading A person uses fraudulent means, schemes, or deceptive practices, or makes false statements about material facts Article 10(4) If the parties behind a rug pull used multiple wallets to trade among themselves and artificially inflate transaction volume, Article 10(2) may apply. If investors were attracted through false lock-up announcements, fabricated social media engagement, or other misleading representations, Article 10(4) may also become relevant. A violation of these provisions may result in imprisonment for at least one year or a fine equal to three to five times the profit obtained or loss avoided through the violation under Article 19(1). Where the unlawful profit or avoided loss is at least KRW 500 million but less than KRW 5 billion, the offender may be sentenced to imprisonment for at least three years. Where the amount is KRW 5 billion or more, the punishment may be life imprisonment or imprisonment for at least five years under Article 19(3). Separate from criminal penalties, the Financial Services Commission may also impose an administrative surcharge in connection with unfair trading conduct. Administrative sanctions and criminal proceedings are legally distinct and may be pursued through separate procedures. The CATFI Case and the Legal Test for a Rug Pull According to the prosecution, the individuals involved in CATFI divided their holdings across multiple wallets and announced a lock-up plan on social media even though the promised restrictions were not actually observed. An influencer allegedly presented himself as an independent third party with no connection to the issuing group and encouraged investors to purchase the token. The defendants were also accused of using multiple wallets to create the appearance of active trading and rising demand. Once purchases by ordinary investors increased, they sold their holdings in a large-scale disposal. The token reportedly increased in value by approximately 1,001 times within 26 hours of issuance. Around 6,000 individuals purchased the token, and 256 investors were found to have suffered losses totaling approximately KRW 900 million. Prosecutors alleged that the defendants used approximately KRW 10 million in initial funds and obtained roughly KRW 400 million in sale proceeds. At the first trial hearing held on June 30, 2026, the defendants admitted the charges. Prosecutors requested a sentence of four years and six months for the influencer alleged to have led the scheme. However, a sharp decline in a token’s price or the failure of a project does not automatically establish a criminal rug pull. Virtual asset investments inherently involve price volatility. It is therefore necessary to distinguish between a genuine business failure and a scheme designed from the outset to deceive investors and extract funds. In practice, investigators may examine whether: ▪️ The parties had planned to sell their holdings before the token was issued or concealed the true amount held by the project team ▪️ Lock-up or token-burning plans were falsely announced, or holdings were distributed across multiple wallets to disguise common ownership ▪️ Trading volume and price movements were artificially created, followed by the closure of social media channels or online communities immediately after the sale Key Legal Issues and Response Options 🔹Criminal Liability of Influencers and Marketing Personnel A person does not avoid criminal liability simply because they did not personally issue the token. An influencer, marketing agency, or account operator may be investigated as a principal offender or an accomplice if they coordinated with the issuing group, published false information, or recommended the token while falsely presenting themselves as an independent third party. Relevant evidence may include: ▪️ Records showing that tokens were transferred to the promoter before the marketing campaign ▪️ Messages concerning the sharing of sale proceeds or trading profits ▪️ Records showing that promotional content was published despite knowledge that the information was false These materials may be important in determining whether the person merely provided advertising services or knowingly participated in the scheme. 🔹Options for Investor Recovery Article 10(6) of the Act on the Protection of Virtual Asset Users provides that a person who violates the unfair trading provisions may be liable for losses caused to users by the violation. Accordingly, investors may consider a civil claim for damages separately from any criminal complaint or prosecution. In practice, however, recovery may be difficult where the issuer operated through anonymous wallets. Identifying the responsible parties and proving a causal connection between the unlawful conduct and the investment loss can require a detailed review of both blockchain records and online promotional materials. Investors should therefore preserve relevant evidence as early as possible, including wallet addresses, transaction hashes, purchase records, social media posts, and announcements concerning lock-ups, listings, or partnerships. Decent Law Firm’s Virtual Asset Practice The CATFI case demonstrates that even where a meme coin is traded through a DEX, false announcements, coordinated trading, and artificial price movements may lead to liability under Korea’s Virtual Asset User Protection Act. It also shows that affected investors may need to consider both criminal proceedings and civil claims for damages. Decent Law Firm’s Virtual Asset Practice reviews on-chain transaction structures and blockchain fund flows in connection with rug pulls, market manipulation, criminal complaints, investigations, and civil damages claims. Where an investment loss appears to involve a rug pull or other unfair trading conduct, legal advice should be obtained at an early stage, beginning with the preservation and review of evidence. This content is provided for general informational purposes only and does not constitute legal advice for any specific matter.
2026-07-14 -
Blogs Criminal
DUI Fines in Korea: The Moment You Think ‘It Should Be Fine’ Is the Riskiest
How Are DUI Fines Determined by Law? Under Article 148-2 of the Road Traffic Act, DUI fines are calculated in proportion to the driver's blood alcohol concentration (BAC). First Offense BAC Statutory Penalty 0.2% or higher Imprisonment of 2 to 5 years, or a fine of 10 million to 20 million KRW 0.08% to under 0.2% Imprisonment of 1 to 2 years, or a fine of 5 million to 10 million KRW 0.03% to under 0.08% Imprisonment of up to 1 year, or a fine of up to 5 million KRW Refusal of a breathalyzer test Imprisonment of 1 to 5 years, or a fine of 5 million to 20 million KRW Repeat Offense BAC Statutory Penalty 0.2% or higher Imprisonment of 2 to 6 years, or a fine of 10 million to 30 million KRW 0.03% to under 0.2% Imprisonment of 1 to 5 years, or a fine of 5 million to 20 million KRW Refusal of a breathalyzer test Imprisonment of 1 to 6 years, or a fine of 5 million to 30 million KRW Because a difference of just a fraction of a percentage point in BAC can shift the entire sentencing range, confirming the exact number and responding early are essential. From Arrest to Punishment: What Is the Process? When someone is caught driving under the influence, the case typically proceeds through the following steps. On-site enforcement - BAC is measured with a breathalyzer Case filing and investigation - Police examine the circumstances of the driving and any prior record Referral to the prosecution - The case file is forwarded to the prosecutor's office Summary or formal indictment - The procedure branches depending on whether an accident occurred and whether it is a repeat offense Trial and sentencing - A summary order results in a fine; a formal trial can lead to actual imprisonment Because the initial statement and supporting materials prepared at this stage have a decisive impact on the final fine amount and whether prison time is imposed, getting legal help immediately after being caught is essential. A Real Case: How a DUI Fine Case Played Out [Case We Handled] Mr. B, a man in his 40s, was caught with a BAC of 0.09% and faced the risk of being referred to a formal trial. Even though it was his first offense and no accident had occurred, Mr. B was alarmed to learn he could still face a formal trial. From the early stage of the investigation, he worked with counsel to systematically prepare favorable materials, including an explanation of the circumstances of his driving and a pledge against reoffending. Thanks to this prompt response, the case was resolved through a summary order instead of a formal indictment, ending in a DUI fine rather than a trial. This shows how much the outcome of a DUI fine case can change depending on how early and how well the response is prepared. Why You Should Work With Decent Law DUI fine cases require professional handling in the following areas. Accurate interpretation of BAC test results Preparing supporting materials and statements of reflection to help secure a summary order Building a long-term defense strategy that also accounts for the risk of enhanced punishment for repeat offenses Decent Law draws on extensive experience handling DUI cases to closely analyze each client's situation and build a systematic defense strategy from the early investigation stage through trial. We stay with our clients from start to finish, so that no one is left at a disadvantage while shaken by an unexpected DUI fine and criminal record. DUI fine cases are a textbook example of matters that become harder to handle as time passes. If you have already been investigated or are facing an upcoming summons, we recommend consulting an attorney experienced in criminal cases rather than making decisions on your own. Decent Law Office is always ready to provide prompt, accurate legal advice to help you find the best path forward for your situation.
2026-07-14 Naver Blog -
Blogs Crypto
Virtual Asset “Hwanchigi” in Korea: Penalties and Key Changes Under the 2026 Foreign Exchange Transactions Act
As cross-border transactions involving virtual assets and overseas payment services continue to increase, Korean regulators are paying closer attention to whether such transactions constitute unlicensed foreign exchange business or illegal remittance activities. The Korea Customs Service recently conducted targeted inspections of high-risk money exchange businesses and identified violations involving false transaction records, foreign currency sales exceeding statutory limits, and failures to report large cash transactions. The businesses selected for inspection also included entities suspected of using virtual assets for illegal cross-border remittances. A major regulatory change will take effect on December 3, 2026, when the amended Foreign Exchange Transactions Act comes into force. Under the amended Act, certain cross-border virtual asset transfer services will become subject to a separate registration requirement. Virtual asset service providers, payment companies, remittance operators, and businesses offering cross-border settlement services should review whether their current business models fall within the scope of the new registration regime. What Is “Hwanchigi” Under Korean Law? “Hwanchigi” is not a term expressly defined in the Foreign Exchange Transactions Act. It generally refers to an arrangement in which funds are transferred across borders without using a bank or another authorized foreign exchange institution. Instead, separate pools of funds or accounts in Korea and another country are used to produce the same economic effect as an international remittance. For example, a person in Korea may pay Korean won to a local operator, while the operator’s overseas partner pays an equivalent amount in foreign currency to the intended recipient abroad. The Korean won received in Korea is not physically transferred overseas. Nevertheless, because a corresponding payment is made abroad, the arrangement produces substantially the same result as an international remittance. Article 8 of the Foreign Exchange Transactions Act generally requires a person who engages in foreign exchange business as a commercial activity to obtain the necessary registration. A person may therefore be regarded as participating in foreign exchange business even if they did not personally send money overseas, provided that their role formed part of a broader structure designed to complete a cross-border payment. A Transaction May Be Regulated Even If No Foreign Currency Crosses the Border Under Korean foreign exchange law, the key issue is not whether the same cash or foreign currency physically crossed the border. What matters is whether payments made in Korea and abroad were connected in a manner that produced the same economic effect as a cross-border transfer. Common structures that may raise regulatory concerns include the following. ▪️ Korean Won Received in Korea and Foreign Currency Paid Overseas A Korean account receives the funds, while an overseas partner or local office pays foreign currency to the designated recipient abroad. ▪️ Funds Received Overseas and Korean Won Paid in Korea Foreign currency or local currency is received outside Korea, and Korean won is then paid into a designated Korean bank account. ▪️ Settlement Through Third-Party Accounts Funds are paid or received through accounts held by family members, employees, acquaintances, or unrelated business entities rather than the actual sender or recipient. ▪️ Offshore and Domestic Obligations Offset Against Each Other Amounts payable in Korea and abroad are offset, allowing the parties to settle without making a conventional international bank transfer. If these transactions are conducted repeatedly and the operator earns fees or profits from exchange-rate differences, the activity may be treated as unregistered foreign exchange business. Why the Supreme Court Treated Virtual Asset Arbitrage as Foreign Exchange Business In its September 4, 2025 decision, Supreme Court Case No. 2024Do16540, the Court confirmed that a transaction may constitute foreign exchange business even where no foreign currency was directly transferred across the border. In that case, the defendant received virtual assets from a non-resident located overseas, sold them through a Korean virtual asset exchange, and transferred the proceeds in Korean won to multiple domestic bank accounts designated by the non-resident. The defendant did not personally remit foreign currency overseas. Nevertheless, the Supreme Court upheld the lower court’s finding that the transaction performed substantially the same function as an inbound remittance service, in which a Korean foreign exchange bank pays Korean won to a domestic recipient based on payment instructions from a foreign bank. The relevant question was therefore not simply whether the defendant had directly sent funds abroad. The Court examined whether the overall transaction structure effectively facilitated payments between Korea and another country. However, the sale of virtual assets followed by a domestic Korean won transfer does not automatically constitute unregistered foreign exchange business in every case. The following factors should be considered together: ▪️ The purpose and background of the transaction ▪️ The size and frequency of the transactions ▪️ The duration and degree of repetition ▪️ Whether fees or exchange-rate profits were earned ▪️ Whether the activity was conducted as a business Can Virtual Assets and Overseas Payment Services Be Treated as Hwanchigi? The use of virtual assets or overseas payment services does not, by itself, exclude a transaction from the application of Korean foreign exchange laws. ▪️ Receiving Korean Won and Sending Virtual Assets to an Overseas Wallet Where Korean won is received in Korea and Bitcoin, USDT, or another virtual asset is sent to an overseas recipient in return, the transaction may be treated as a cross-border payment service rather than a simple virtual asset sale. ▪️ Receiving Virtual Assets Overseas and Paying Korean Won in Korea A transaction may also be treated as cross-border payment activity where virtual assets received from overseas are sold in Korea and the proceeds are paid into domestic accounts designated by the overseas party. ▪️ Settling Funds Through WeChat Pay or Alipay Regulatory concerns may arise where Korean won is received in Korea and an overseas payment account is funded abroad, or where funds are received overseas and Korean won is paid to a recipient in Korea. These transactions are not automatically illegal. The authorities will generally examine: ▪️ Whether the domestic payment corresponded to an overseas payment ▪️ Whether third-party accounts were used ▪️ Whether the activity was repeated ▪️ Whether the operator earned fees or exchange-rate profits ▪️ Whether the transaction was conducted for a commercial purpose Key Changes Under the 2026 Amendment to the Foreign Exchange Transactions Act The amended Foreign Exchange Transactions Act was promulgated on June 2, 2026 and will take effect on December 3, 2026. The amendment introduces three major changes. ▪️ Registration Requirement for Cross-Border Virtual Asset Transfer Services A virtual asset service provider that uses virtual asset sales, purchases, or exchanges to transfer value between Korea and another country, or to produce substantially the same effect, will be required to register with the Minister of Economy and Finance. A virtual asset service provider registration under the Act on Reporting and Using Specified Financial Transaction Information may not be sufficient by itself. A separate registration under the Foreign Exchange Transactions Act may be required where the business provides cross-border virtual asset transfer services. ▪️ Stronger Administrative Sanctions for Operating Outside the Registered Scope A specialized foreign exchange business operator that conducts foreign exchange activities outside its registered scope may be subject to: ▪️ Cancellation of registration ▪️ Business restrictions ▪️ Suspension of business ▪️ Administrative surcharges imposed in place of certain suspension measures Businesses should therefore confirm that their actual services remain within the scope of their registration. ▪️ Criminal Penalties for Unregistered Business and Certain Payment Procedure Violations A person who conducts cross-border virtual asset transfer business without registration may be subject to: ▪️ Imprisonment for up to three years ▪️ A fine of up to KRW 300 million The amended Act also introduces criminal penalties of: ▪️ Imprisonment for up to one year ▪️ A fine of up to KRW 100 million These penalties may apply where a person violates prescribed payment procedures for the purpose of obtaining an improper financial benefit for themselves or another person. The amendment does more than simply clarify which businesses must register. It expressly brings cross-border virtual asset transfer services within the registration framework and clarifies the scope of criminal liability for unregistered activities and certain payment procedure violations. The Substance of the Fund Flow Matters More Than the Name of the Transaction Virtual asset-based hwanchigi and arbitrage cases are primarily governed by the Foreign Exchange Transactions Act. Depending on the transaction structure, the following laws may also apply: ▪️ The Act on Reporting and Using Specified Financial Transaction Information ▪️ The Virtual Asset User Protection Act ▪️ Other criminal and financial regulations related to money laundering, fraud, or unlawful fund transfers Businesses and individuals should review the entire flow of funds, including: ▪️ The roles of the parties ▪️ Domestic and overseas bank transactions ▪️ Wallet transfers and transaction records ▪️ Fee and exchange-rate arrangements ▪️ The frequency and commercial nature of the activity Decent Law Firm’s Virtual Asset Practice Group advises clients on investigations involving alleged violations of the Foreign Exchange Transactions Act and virtual asset-based remittance activities. We also assist virtual asset businesses, payment providers, and cross-border settlement operators in assessing whether their services are subject to registration under the amended Act. Where the Korea Customs Service or the police requests attendance or submission of documents, or where a business needs to determine whether its services fall within the amended regulatory framework, the transaction structure and supporting records should be reviewed before responding. This publication is provided for general informational purposes only and does not constitute legal advice for any specific matter.
2026-07-13 Naver Blog
