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Media Coverage'I Trusted It Was a Well-Known Securities Firm'—Securities Firm Impersonation Scam
These days, many people use securities company apps for mobile trading when investing in stocks. Taking advantage of this, investment scams that impersonate securities company apps and executives are on the rise. Reporter Lee Sun-young has the details. (omitted) Pureun “Ian” Hong, Financial Fraud Specialist Attorney, said, "Apps installed through external links are completely exposed to hacking risks. Furthermore, in the case of real stocks, securities companies have safety mechanisms in place to protect investors even if the company goes bankrupt. Depositing money into an account other than your own (as instructed by the scam) is highly likely to be fraud, so please be cautious."
2024-01-08 MBC Gyeongnam -
Media Coverage
Will Binance Be Held Back by Its Lawsuit with the U.S. SEC?
After reaching the largest settlement in history with the U.S. government, Binance continues its lawsuit with the U.S. Securities and Exchange Commission (SEC), and Binance founder Changpeng Zhao has taken a firm stance against the SEC. On the 13th (local time), Binance submitted documents to the court arguing that "the SEC has focused on transactions in which tokens were purchased from other anonymous token holders on Binance's website," and "there was no contract with the initiators of these transactions to invest funds." They contended that the SEC's claims of illegal investment contracts and securities sales by Binance do not hold, and the lawsuit should be dismissed. They also mentioned that the term "investment contract" is ambiguous when applied to digital asset transactions. Binance emphasized, "The term 'investment contract' is vague when applied to digital assets, and this issue should be decided by Congress, not the courts." (omitted) Hyeonsu “Elliot” Jin, Managing partner at Decent Law Firm, stated, "The SEC's lawsuit is regarding violations of securities laws. The settlement with the U.S. government is a separate matter," and added, "Binance's motion to dismiss the lawsuit is unlikely to be accepted in principle. The settlement may work against Binance in the ongoing SEC lawsuit." As the SEC expressed its intent to proceed with the lawsuit, Changpeng Zhao's planned trip to the UAE was also canceled. Previously, a U.S. court granted Zhao permission to travel to his home in the UAE, but at the request of the Department of Justice, he was ordered to remain in the U.S. until the SEC's trial ruling in February next year. Attorney Jin explained, "The UAE is not a country with an extradition treaty with the U.S., and it has never accepted such requests from the U.S. Moreover, a significant portion of Changpeng Zhao's assets are understood to be outside the U.S.," adding, "The court likely determined that if Zhao were to leave the country, there is no guarantee he would return to the U.S. In the end, they saw the potential for Zhao to flee."
2023-12-13 Korea Economy -
Articles
The Manipulation of Cryptocurrency Markets and Market Makers
Prohibition and Limited Permission of Market Manipulation In South Korea, the Capital Markets Act prohibits market manipulation. In stock markets, thinly traded stocks with wide bid-ask spreads are vulnerable to sharp price fluctuations with minimal trades. To counteract this, market makers stabilize prices by narrowing bid-ask spreads and preventing extreme volatility. What is a Market Maker? Market makers are entities permitted to manipulate trading volumes legitimately to stabilize stock prices. The Capital Markets Act allows their interventions to fulfill this objective. Thanks to this system, stable stock prices are maintained except during unusually large-scale trades. Market Makers in Cryptocurrency Exchanges Cryptocurrency markets also have market makers. Initial listing prices of tokens are set by exchanges, and subsequent prices are determined through user trading. Early post-listing stages often see significant bid-ask gaps, causing sharp price swings. Market makers intervene to address this volatility. Unlike stock markets, the crypto industry lacks legal regulations for market makers. Crypto exchanges often charge listing fees that include market-making costs to artificially create liquidity and stabilize new token prices. However, South Korean prosecutors view such practices as manipulative. Cases Related to Market Making in Crypto Exchanges The Upbit Case The "Upbit wash trading allegation" is a notable case that highlights the legal stance on market making in crypto exchanges. Prosecutors indicted Upbit representatives in 2018 for market manipulation. Lower courts acquitted them, emphasizing the absence of specific regulations on liquidity provision. However, in appellate courts, procedural issues invalidated crucial evidence, leaving detailed judicial examination of market making unaddressed. The Coinone Listing Scandal The Coinone listing scandal involved brokers bribing Coinone to list certain cryptocurrencies. They inflated trading volumes and prices to lure investors before offloading at peak prices. The court identified these activities as manipulative rather than legitimate market making, leading to convictions. Future Regulation: The Virtual Asset User Protection Act The recently passed Virtual Asset User Protection Act, set to take effect on July 19, 2024, introduces penalties for market manipulation under Article 10. Similar to stock market mechanisms, crypto markets may also benefit from regulated market makers to stabilize prices. However, clear standards for who qualifies as a market maker, and how they should operate, remain undefined. Conclusion While the crypto market currently operates in a legal grey area regarding market making, the new law is an opportunity to establish robust legal frameworks. Addressing market manipulation under the guise of market making can enhance market stability and investor trust.
2023-12-01 Coin Desk Korea -
Media Coverage
Hundreds of Billions in Multi-level NFT Fraud Allegations Involving Coupang and Naver
A group of individuals who attracted investors by promising to operate a "profit-guaranteed shopping mall" that would resell products sourced from popular overseas online stores on domestic platforms like Naver and Coupang, but failed to pay the promised returns, is now under police investigation. It was revealed that, contrary to their promises, they brought in counterfeit goods, misused investors' personal information, and even issued Non-Fungible Tokens (NFTs) under the guise of innovative e-commerce to attract investment funds. (omitted) Pureun “Ian” Hong, Managing partner at Decent Law Firm, the legal representative for the victims, argued that their methods amounted to a pyramid scheme and a Ponzi scheme. Attorney Hong stated, "They shifted the responsibility of recruitment onto the investors by offering them incentives for bringing in new investors." He added, "With limited actual profit generation, it appears they were using funds from newly recruited investors to pay returns to earlier investors under the guise of profits." He further emphasized, "If an investment offers unusually high returns or unfamiliar methods of receiving funds, it’s important to be suspicious and to consider the risks of acting as a nominee before investing."
2023-12-01 Seoul Economy -
Media Coverage
Whales, the Major Players in the Coin Market, Hold 90% of Coins on Upbit
In Upbit, a domestic Korean Won-based virtual asset exchange, it has been found that in 9 out of 10 virtual assets traded, large investors (whales) hold more assets than small investors. This suggests that the circulated virtual assets are concentrated in the hands of issuers or a few intermediary businesses. Experts point out that in a coin market skewed towards whales, it is difficult to form healthy price levels, and the risk of a sharp price crash following large-scale sell-offs looms. (omitted) Pureun “Ian” Hong, Managing partner at Decent Law Firm, pointed out, "The market price is controlled by the decisions of a few whales. When whales sell large amounts of coins, the market is flooded with more than individual investors can absorb, leading to an inevitable drop in prices." The Wemix crash is a prime example of small investors being caught in the moves of whales. In late 2021, Wemade, the company behind Wemix, made a large-scale sale without prior notice, earning about 200 billion KRW. The price of Wemix subsequently plummeted by around 70%. Wemix investors then accused Wemade of misleading them about the circulation volume and filed a complaint against CEO Jang Hyun-guk, with the Seoul Southern District Prosecutors’ Office currently investigating whether Jang violated any laws. The fact that virtual assets operate in a regulatory blind spot further reduces the investment security of small investors. In securities markets, it is possible for a small number of individuals to hold a significant portion of shares. However, securities are subject to regulations such as disclosure requirements and insider trading prohibitions, which provide investor protection. In contrast, there are no such regulations in place for virtual assets. Attorney Hong said, "While there is some legal ambiguity around coins, they are not currently subject to regulations under the Capital Markets Act or the Commercial Act. As a result, measures to protect investors are extremely limited."
2023-11-21 biz.chosun -
Articles
Why You Shouldn't Give Up on Unrecoverable Receivables
Unrecoverable receivables often arise when a debtor lacks the financial means to settle their debts. In such cases, businesses may choose not to initiate legal proceedings, considering the debtor's insolvency. However, overlooking such receivables without evaluating civil, criminal, and tax implications may not always be the best course of action. Approaches to Handling Receivables Receivables management includes methods such as email reminders, certified letters, and formal demand notices, followed by debt collection procedures and legal actions. Typically, corporate disputes involve: Assessing the debtor’s financial status through a credit bureau. Initiating asset and receivables attachments. Filing a civil lawsuit. However, given the time and costs involved, businesses may decide against litigation or pursue settlements when the debtor is insolvent. That said, proper consideration of civil, tax, and criminal implications is essential in choosing the right course of action. Civil Implications Statute of Limitations: The statute of limitations for most business receivables is five years. Filing a lawsuit interrupts the statute of limitations, making it possible to enforce claims later if the debtor regains financial stability. If no legal action is taken within five years, the debtor can invoke the statute of limitations, rendering the receivables irrecoverable. Tax Implications Corporate Tax Deductions: The Corporate Tax Act allows businesses to deduct the value of bad debts if the debts meet specified conditions. However, the National Tax Service requires companies to provide evidence that they pursued all necessary legal actions, such as filing lawsuits, to recover receivables. Without such actions, even objectively unrecoverable receivables may not be deductible for corporate tax purposes. In short, to claim tax deductions for bad debts, businesses must provide objective evidence that all feasible recovery efforts were made. Criminal Implications Potential for Breach of Fiduciary Duty: If a business opportunity exists to recover a receivable, but the company’s representative deliberately refrains from filing a lawsuit, claiming insolvency or personal judgment, they could be held liable for breach of fiduciary duty. This could lead to legal consequences for failing to act in the company’s best interest. Recommendations To mitigate risks, it is essential to: Assess the debtor's financial situation: Investigate the debtor’s financial capacity and assets. Evaluate recovery costs and potential outcomes: Balance recovery costs against the likelihood of successful collection. Consider legal actions for statute of limitations and tax purposes: Ensure appropriate legal measures are taken to suspend the statute of limitations and substantiate tax claims. Factor in criminal liability risks: Avoid situations where negligence could be construed as breach of fiduciary duty. Even if receivables seem unrecoverable, pursuing legal and procedural steps can safeguard your business from further liabilities and help optimize financial outcomes.
2023-11-07 와우테일(WOWTALE)