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Recovery Strategies Every Blockchain Scam Victim Must Know
Why Blockchain Scams Cause Such Severe Damage Unlike conventional financial fraud, blockchain scams are rooted in the abuse of technological characteristics. Due to the inherent nature of blockchain technology, once a virtual asset transaction is completed, it is technically irreversible. This non-reversible structure makes post-incident recovery extremely difficult. When overseas exchanges or foreign wallets are involved, jurisdictional issues further complicate the situation, significantly raising the difficulty of any legal or practical response. A major problem is that many victims mistakenly perceive these cases as mere investment losses. Technical jargon such as whitepapers, smart contracts, and algorithms is often used to disguise intentional deception, causing victims to miss the critical window for effective action. In practice, early response timing plays a decisive role in determining whether meaningful recovery is possible in blockchain fraud cases. For those already experiencing anxiety and fear due to such losses, we hope this guide helps provide some clarity and direction. Common Types of Blockchain Scams (From the Victim’s Perspective) In practice, blockchain scams tend to follow recurring patterns: Fraud disguised as coin investments or private sales Schemes posing as crypto loans, staking programs, or yield products Fake exchanges, wallets, or phishing sites designed to steal login credentials or assets Signal groups, automated trading services, or guaranteed-profit schemes The critical issue is distinguishing between ordinary investment risk and losses caused by deceptive conduct. This distinction directly affects whether criminal fraud charges may be established and whether civil liability for damages can be pursued. If this assessment is incorrect, the entire response strategy may be fundamentally misguided. Immediate Actions to Take Once You Recognize the Fraud If fraud is suspected, the first step is to immediately stop any further transactions, change passwords for all related accounts, and prevent secondary damage. At the same time, evidence preservation is the highest priority. You must securely retain and back up original materials, including transaction hashes, wallet addresses, screenshots and original files of Telegram, KakaoTalk, or email communications, website URLs and whitepapers provided by the counterparty, contracts, and transfer records. Failure at this stage can create decisive limitations in both criminal and civil proceedings later on. You may request withdrawal freezes from virtual asset service providers (exchanges), ask investigative authorities to suspend payments related to fraudulent accounts, and consider filing a report under the Act on the Prevention of Telecommunications-Based Financial Fraud and Refund of Damage Proceeds. The earlier the response, the greater the possibility of practical measures being taken. Waiting passively only reduces the available options—active intervention is essential. How Decent Law Firm Makes a Practical Difference Blockchain scam cases cannot be resolved simply by filing a criminal complaint. They require a coordinated strategy that integrates structural analysis of the scam, clear legal issue identification, and parallel criminal and civil actions. Decent Law Firm conducts in-depth reviews of transaction flows and technical structures to precisely assess whether fraud is legally established, and prepares structured criminal complaints and legal memoranda for submission to investigative authorities. We also develop realistic, case-specific strategies involving exchanges, overseas platforms, and potential civil recovery depending on the feasibility of identifying the perpetrators. Ultimately, blockchain scams are not merely technical issues—they are problems of legal structure and accountability. If damage has already occurred, it is crucial not to proceed alone. Early, accurate legal intervention is the most effective way to define the proper course of action. In blockchain fraud cases, speed and precision make a tangible difference. We strongly encourage you to prepare and act without further delay.
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Tax Obligations for Domestic Virtual Asset Trading
Currently, there is no explicit legal basis for taxing income from virtual asset trading under the current tax laws in South Korea. As a result, no taxation is imposed. Courts have also weighed in on this matter with rulings that clarify the legal stance. Seoul Administrative Court Ruling The Seoul Administrative Court ruled: "Under the current tax laws, income from virtual asset trading by individuals (residents and non-residents) and foreign corporations is not listed as taxable income under the Income Tax Act and is therefore not subject to taxation." The court provided the following rationale for its decision: Virtual Assets as Non-Tangible Domestic Assets Virtual assets do not qualify as "domestic assets other than real estate" under the former Income Tax Act (Article 119, Paragraph 12, Subparagraph (m)). As virtual assets are stored and maintained across a global network of computers connected through blockchain, they cannot be considered assets located within Korea. Exclusion from Economic Benefits Clause Income from virtual asset transactions does not meet the criteria for "economic benefits derived from assets located within Korea or similar income" under the same statute (Subparagraph (k)). Principle of Tax Legality Under the principle of legality in tax law, tax regulations must be strictly interpreted as written without expansion or analogy unless special circumstances justify otherwise. Enumerative Tax System The Income Tax Act employs an enumerative system, meaning only income explicitly listed in the law can be taxed. Unlisted income remains untaxed. Planned Taxation of Virtual Asset Trading Income The South Korean government plans to implement taxation on virtual asset trading income starting January 1, 2025. Key Provisions of the Revised Tax Laws Income Classification: Revised Income Tax Act (Article 21, Paragraph 1, Subparagraph 27) categorizes "income from the transfer or lending of virtual assets" as other income. Source of Income: Revised Income Tax Act (Article 119, Paragraph 12, Subparagraph (n)) designates this income as domestic source income for non-residents. Withholding Tax Rates: Revised Income Tax Act (Article 156, Paragraph 1, Subparagraph 8, Clause (b)) specifies withholding tax rates for virtual asset trading income, differentiating cases based on whether the acquisition cost is verifiable. Corporate Tax Inclusion: Revised Corporate Tax Act (Article 93, Paragraph 10, Subparagraph (k)) includes virtual asset income as domestic source income for foreign corporations. Implementation Timeline Initially scheduled for January 1, 2022, the enforcement was delayed twice and is now set to commence on January 1, 2025. The taxation will apply to transfers or lending of virtual assets occurring after this date. However, there remains a possibility of further postponement. Current and Future Taxation Implications As of now, there is no tax obligation for income generated from virtual asset trading due to the lack of explicit legal grounds. However, once the revised laws come into effect on January 1, 2025, tax obligations will likely arise. Monitoring and Considerations Tax regulations and their interpretation may evolve. Therefore, continuous monitoring is essential. Specific issues, such as the determination of acquisition costs, handling of transactions through foreign exchanges, and taxation of various virtual asset transaction forms (e.g., DeFi, NFTs), are expected to be clarified before the tax implementation. Stakeholders should stay informed on these developments.
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Supreme Court Ruling: Legal Characteristics and Specificity of Virtual Assets in South Korea
The Supreme Court of South Korea has defined virtual assets as "digital representations of economic value that are not controlled by the state but are granted value through blockchain or other encrypted distributed ledgers, qualifying as property benefits" (referencing Supreme Court Decision 2021Do9855, November 11, 2021). The Court emphasized the distinct characteristics of virtual assets, such as the ability to verify only the addresses of electronic wallets without identifying the user's personal information, and the distributed recording of transaction histories, which set them apart from traditional assets. Furthermore, the Supreme Court noted that virtual assets are not subject to the same level of regulation as legal tender and involve inherent risks in transactions. Consequently, the Court concluded that virtual assets do not warrant the same level of legal protection as legal tender under criminal law.
