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Stock Signal Group Fraud in Korea: A Guide From Reporting to Recovering Your Losses
1. When Can Losses From a Stock Signal Group Be Considered Fraud? If the operator of a stock "signal group" deceived investors with lies or fabricated materials to make them hand over money, this may constitute fraud. Article 347 of Korea's Criminal Act punishes deceiving a person to obtain property or a property-related benefit as fraud. The current statutory penalty for fraud is imprisonment for up to 20 years or a fine of up to KRW 50 million. This penalty was increased by an amendment that took effect on December 23, 2025. What matters, however, is not simply that the investment result was poor, but whether there was deception in the process that led the victim to pay money. For example, the following circumstances warrant a closer look at the underlying facts. Claiming to represent an expert or company that does not actually exist Presenting fabricated account returns or trading records Promising to guarantee the principal or a fixed return despite the possibility of loss Receiving money in the name of investment funds without actually investing it Demanding additional deposits under pretexts such as taxes, security deposits, or fees when withdrawal is requested Giving an explanation about the use of the funds or the transaction structure that differs from the truth In particular, if a person received investment funds while having no intention or ability from the outset to provide a legitimate investment service, whether fraud is established can be examined more actively. If the amount gained through the crime is KRW 500 million or more, aggravated punishment under the Act on the Aggravated Punishment of Specific Economic Crimes may also be examined. However, how to calculate the damages of multiple victims can vary depending on the structure of the offense and the relationships among co-offenders. 2. Does Every Investment Loss in Stocks Mean Fraud? No. The mere fact that a loss occurred due to normal market fluctuations during an otherwise legitimate investment does not establish fraud. Because stock prices inherently carry the possibility of fluctuation, it is difficult to punish an operator for fraud simply because a recommended stock fell in price or an expected return was not achieved. Therefore, in the investigation process, what explanation the investor received before paying money or purchasing stock is generally the key point of review. Key checkpoints for distinguishing fraud from a simple loss Category What to check Evidence worth securing Likely a simple investment loss Stock was actually purchased normally, and the loss occurred from market fluctuation Securities account transaction history, recommendation messages False representation of returns Fake profit verification or manipulated account screens presented Advertisement screenshots, profit-verification images Guarantee of principal or profit Explanation that "there is no loss" or "the return is guaranteed" KakaoTalk/Telegram conversations, recordings Inducement of additional deposits Additional remittances demanded citing withdrawal, taxes, deposits, etc. Remittance records, withdrawal-request conversations False use of investment funds Money was said to be invested but was actually used for other purposes Account transfer records, contracts Individualized investment instructions Specific stocks, prices, and buy/sell timing continuously instructed for the individual 1:1 consultation records, paid chat room conversations Ultimately, what matters more than the size of the loss is whether the explanation that led to the investment decision was true. In particular, if you were told things such as "insider information available only to VIPs," "a stock confirmed to list soon," or "the company guarantees the principal," you should check whether there was any actual basis for such claims. 3. Even If It Is Not Fraud, Could It Violate the Capital Markets Act? Yes. Depending on how the stock signal group is operated, a violation of the Capital Markets Act may be at issue separately from fraud. The Financial Investment Services and Capital Markets Act currently defines as a "quasi-investment advisory business" the business of providing, for consideration from customers, non-individualized advice on investment judgments or the value of financial investment products through publications, broadcasts, or other communication media. On the other hand, if advice on investment judgment is provided individually, reflecting an investor's financial situation or investment objectives, this may fall under the "investment advisory business." In connection with a system implemented from August 14, 2024, Korea's Financial Services Commission has announced that providing investment advice to paying members through two-way channels such as SNS or open chat rooms may be subject to regulation as an investment advisory business. Operating an investment advisory business without registration may raise issues of imprisonment for up to 3 years or a fine of up to KRW 100 million under Articles 17 and 445 of the Capital Markets Act. In addition, Article 101-2 of the Capital Markets Act currently prohibits quasi-investment advisory businesses from the following types of advertising. Advertising that could be mistaken for that of a financial company Advertising that could be mistaken as guaranteeing against loss or guaranteeing profit Advertising presenting a rate of return that is false or has not actually been realized This is a currently effective regulation. Therefore, the mere fact that an operator reported itself to the financial authorities as a quasi-investment advisory business does not mean that all of its business practices are automatically lawful. 4. If I File a Criminal Complaint, Can I Get My Money Back? Filing a criminal complaint alone does not automatically result in the return of the money you lost. Criminal procedure is a process for determining whether the offender's crime is established and for imposing punishment. Therefore, even if the investigative agency recognizes the fraud charge, if the offender has no assets, there may be real difficulty in recovering the lost funds. To recover the lost funds, the following methods can be considered together with the criminal procedure. ① Civil claim for damages Under Article 750 of the Civil Act, a person can claim damages from someone who caused harm through an intentional or negligent unlawful act. ② Provisional attachment If you have identified specific assets of the offender, such as a bank account or real estate, a provisional attachment before filing the main lawsuit can be considered. Article 276 of the Civil Execution Act recognizes provisional attachment as a way to preserve future compulsory execution of monetary claims and the like. However, obtaining a provisional attachment requires substantiating the underlying claim and the necessity of preservation. ③ Order for restitution at the criminal trial stage If a fraud case is prosecuted, filing for an order for restitution during the criminal trial can also be considered. Once an order for restitution is finalized, the certified copy of the guilty judgment may carry the same effect as a certified copy of a civil judgment with executory force for purposes of compulsory execution. However, if the amount of damages or the scope of liability is unclear, the court may dismiss the application for restitution. Recovering the lost funds therefore requires looking not only at whether to file a complaint, but also at the offender's personal details and assets, the remittance route, and the stage of the criminal case. 5. What Should I Prepare Before Reporting a Stock Signal Group Scam? The first thing to do is to secure the relevant materials before leaving the signal group chat room or deleting the conversation. Stock signal group cases often involve advertising, consultation, and deposits all taking place online, so posts may be deleted or the operator may switch accounts as time passes. It is advisable to organize the following materials in their original form as much as possible. 1) Keep the entire chat history of the signal group Rather than picking out only the stock recommendation messages from KakaoTalk, Telegram, or text messages, secure the entire flow from the inducement to join through the request for investment and withdrawal. 2) Capture the advertisements and return-rate materials Keep the advertisements you saw when you joined, such as promises of a guaranteed principal, guaranteed returns, expert credentials, and successful investment cases. 3) Organize the deposit and transaction records Organize, in chronological order, who you sent money to, which account it went to, and how much. If you actually purchased stock through a securities account, prepare that transaction history as well. 4) Secure information about the operator and the business Secure the trade name, the representative's name, the phone number, the account holder's name, the website address, the business registration number, and any SNS accounts used. 5) Write out the timeline of the harm Organizing the sequence of events — the date you first saw the advertisement → joining → the explanation given → the initial deposit → additional deposits → the demand for withdrawal → loss of contact — helps you explain the facts of the complaint more clearly. 6) Keep other victims' materials separate from your own account of the facts Even where other victims of the same signal group are identified, the amount deposited and the explanations given may differ from victim to victim. You should keep what you personally experienced separate from other victims' materials. If you realized you had been victimized right after sending money, it is advisable to contact your financial institution and the investigative agency promptly to check whether any action can be taken on that transaction. However, an immediate account freeze is not possible in every stock signal group case, so the specific remittance method and type of crime involved should be checked separately. 6. Frequently Asked Questions (FAQ) Q1. The stock signal group said the principal was guaranteed, but I incurred a loss. Is that automatically fraud? A promise to guarantee the principal can be an important piece of evidence, but that alone does not conclusively establish fraud. It is necessary to comprehensively check whether there was actually an intention and ability to cover the loss at the time of the promise, whether false returns or false information were presented along with it, and whether the investor paid money in reliance on that explanation. Because the Capital Markets Act also regulates loss compensation and profit guarantees by quasi-investment advisory businesses, an issue under the Capital Markets Act can be examined separately from criminal fraud. Q2. If the investment advisory firm is unregistered, is the contract automatically void and can I get a full refund? The mere fact that a firm is unregistered does not mean the entire contract automatically becomes void. Korea's Supreme Court has held that a violation of the prohibition on operating an unregistered investment advisory business under Article 17 of the Capital Markets Act does not, by itself, mean that the private-law effect of the investment advisory contract is immediately negated. Q3. If the signal group has already been deleted and I cannot reach the operator, is it difficult to report? The fact that some materials have disappeared does not mean that reporting itself is impossible. You should first secure whatever materials remain, such as account transfer records, text messages, existing screenshots, card payment records, and the other party's phone number and account holder's name. In particular, since the account holder and the actual signal group operator may be different people, it is important to organize the flow of funds and the role of each party involved. 7. Summary and Points to Note The mere fact that a loss occurred in a stock signal group does not by itself establish fraud. Whether there was a false explanation at the time of joining or investing, whether money was paid in reliance on that explanation, and how the operator actually used the funds are the key factors for judgment. If you suspect you have been victimized, rather than simply contacting the operator repeatedly, you should first preserve the chat history, advertising materials, remittance records, and a timeline of what happened. Decent Law Firm reviews the circumstances of joining, the process of inducement to invest, the flow of funds, and the operator's explanatory materials in stock signal group cases to identify the applicable issues, such as fraud and violations of the Capital Markets Act. In addition to filing a criminal complaint, when the other party's assets can be identified, we review procedures for recovering the lost funds — such as provisional attachment, a civil claim for damages, and an order for restitution — and guide clients toward a response strategy suited to the stage of their case.
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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.
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Overseas Futures Trading Lawyer: What You Need to Know Before an Investigation Begins
Why Domestic Promotion of Overseas Futures and FX Margin Trading Can Be Problematic Trading overseas futures or FX margin products is not, in itself, completely prohibited under Korean law. The issue arises when individuals or entities provide brokerage-related services or facilitate such trading activities within Korea without the required authorization. Under the Financial Investment Services and Capital Markets Act ("Capital Markets Act"), any person engaging in the business of trading, brokerage, or intermediation of financial investment products must obtain authorization from the Financial Services Commission. Overseas futures and FX margin products are classified as derivatives under the Capital Markets Act. Depending on the manner and extent of a person's involvement, different offenses and penalties may apply. For example, legal issues may differ depending on whether a person: Assists clients in opening accounts on overseas platforms such as MT4 or MT5; Operates a trading signal or "copy-trading" community; Receives and manages client funds directly. Case Study: “I Only Helped Connect People to the Platform” Mr. A had traded overseas futures for several years and built a track record of profitable trading. As his results became known among acquaintances, several people expressed interest in participating. Mr. A began assisting them with MT5 account registration and deposit procedures. He later operated a KakaoTalk group chat and Telegram channel where he provided real-time trading signals and received monthly subscription fees from members. Mr. A believed that he was merely providing information because each customer opened and managed their own account. His position was simple: "The investment decisions were made by the customers themselves." However, he eventually received notice that he had become the subject of a Financial Supervisory Service (FSS) investigation, which later developed into a criminal investigation. Investigators concluded that Mr. A's conduct went beyond merely providing market information. They focused on the fact that he continuously communicated with members in real time and repeatedly instructed them on entry and exit points for trades in exchange for compensation. When evidence emerged suggesting direct involvement in certain members' trading accounts, the allegations became significantly more serious. Why “Providing Information Only” Can Still Lead to Violations of the Capital Markets Act This is where many people misunderstand the legal risks. As involvement becomes more substantial, the potential offenses become more serious. Investigators typically focus on factors such as the following: Commercial Nature of the Activity Did the operator repeatedly collect fees while promoting services to the general public? → Potential issue: Violation of regulations governing quasi-investment advisory businesses Interactive Communication Did the operator provide individualized trading recommendations through open chat rooms, Telegram channels, or similar platforms? → Potential issue: Unregistered investment advisory business Automated Trading Execution Did the operator use API integrations or copy-trading systems that automatically replicated trades for clients? → Potential issue: Operating an investment discretionary management business without registration Involvement in Client Funds Did client funds pass through the operator's accounts, or did the operator directly participate in the trading process? → Potential issue: Unauthorized investment brokerage business Since August 2024, Korean regulations have prohibited quasi-investment advisory businesses from operating interactive communication channels with subscribers. This is one reason why the argument that someone was "only providing information" may no longer be persuasive from the outset. Additional Charges Such as Illegal Fundraising and Fraud May Also Apply If investors were recruited using representations such as: "Guaranteed monthly returns" "No risk of principal loss" "Guaranteed profits" additional criminal liability may arise under the Act on the Regulation of Conducting Fund-Raising Business Without Permission. This law prohibits raising funds from an unspecified number of individuals while promising repayment of principal, interest, or other guaranteed returns without proper authorization. Where an operator attracts investors through a trading signal service or investment community while emphasizing guaranteed profits, authorities may pursue multiple charges simultaneously, including: Violations of the Capital Markets Act; Violations of laws regulating unauthorized fundraising activities; Fraud. For example, in 2025, the Gyeonggi Nambu Provincial Police Agency arrested 28 individuals accused of raising approximately KRW 140 billion from more than 2,400 investors by claiming they would generate profits through FX margin trading. Authorities reportedly applied charges including fraud, illegal fundraising, and violations of the Door-to-Door Sales Act. This illustrates why overseas futures and FX margin trading cases rarely involve only a single allegation. What to Review If You Have Been Contacted by Investigators If any of the following situations apply to you, legal review before questioning may be advisable: ▪ Providing paid overseas futures or FX margin trading signals through Telegram, KakaoTalk, or similar platforms; ▪ Assisting clients with MT4, MT5, or similar platform account openings while receiving commissions or referral fees; ▪ Operating copy-trading services using clients' API keys or automated trading systems. Depending on the specific facts, authorities may allege: Violations relating to quasi-investment advisory businesses; Unregistered investment advisory activities; Unregistered investment discretionary management services; Unauthorized investment brokerage; Illegal fundraising activities; Fraud. The direction of statements made during the early stages of an investigation can significantly influence the development of the case. Understanding the legal structure of the allegations before attending an interview is therefore critical. The Digital Asset Practice Team at Decent Law Firm regularly advises individuals and businesses involved in investigations concerning unauthorized overseas futures and FX margin trading activities. If you have been contacted by investigators or have already been scheduled for questioning, it is important to understand the nature of the allegations and the overall structure of the case before appearing for an interview.
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Criminal Risks for MetaTrader-Based Overseas Futures Signal and Copy Trading Operators in Korea
Growing Scrutiny of MetaTrader-Based Overseas Futures Signal Businesses MetaTrader 4 and 5 are trading platforms commonly used for overseas futures, FX trading, and CFDs, or contracts for difference. The MetaTrader platform itself is not illegal. The legal risk arises from how the business is operated. In Korea, issues may arise where an operator uses MetaTrader to run a trading signal room, copy trading service, or investment consulting business, while also directing users to a specific overseas broker and receiving referral commissions based on users’ trading volume. In such cases, Korean investigative authorities may examine whether the business structure constitutes fraud under the Korean Criminal Act or a violation of the Financial Investment Services and Capital Markets Act, commonly referred to as the Capital Markets Act. Applicable Laws Allegation Applicable Law Statutory Penalty Inducing investment through deception Article 347 of the Criminal Act, Fraud Imprisonment for up to 20 years or a fine of up to KRW 50 million, based on the current provision as of the publication date Conducting unregistered investment advisory or discretionary investment management business Articles 17 and 445(1) of the Capital Markets Act Imprisonment for up to 3 years or a fine of up to KRW 100 million Conducting unauthorized investment brokerage business Articles 11 and 444(1) of the Capital Markets Act Imprisonment for up to 5 years or a fine of up to KRW 200 million Paid one-on-one or interactive signal services beyond the scope of quasi-investment advisory business Articles 17 and 445(1) of the Capital Markets Act Imprisonment for up to 3 years or a fine of up to KRW 100 million Improper business conduct by a quasi-investment advisory business operator Article 101-2 of the Capital Markets Act and related provisions Administrative sanctions, including administrative fines, inspections, and possible cancellation of registration The statutory penalty for fraud under the current Korean Criminal Act is imprisonment for up to 20 years or a fine of up to KRW 50 million. However, the actual penalty range in a specific case may vary depending on the timing of the alleged conduct, the applicable version of the law, and whether multiple offenses are found to be in concurrence. Fraud and violations of the Capital Markets Act are separate offenses with different legal elements and protected interests. Where both allegations are raised, the overall criminal exposure may increase depending on the scale of damage, business period, amount of referral revenue, and the specific role of the operator. Fraud Issues Under the Korean Criminal Act For fraud to be established in an investment-related case, there must generally be deception, mistake, a disposition of property, financial gain, and a causal relationship between these elements. In MetaTrader-based signal or copy trading cases, investigative authorities may focus on whether the operator had the actual ability and intent to generate the profits represented to customers. 1. Ability to Generate Profits Investigators may review the operator’s investment experience, trading record, risk management ability, and the explanations given to customers to determine whether the operator had an objective basis for the profits described. If the operator claimed to be an expert despite limited investment experience, or used expressions such as “stable returns,” “principal guaranteed,” or “no-loss trading,” those statements may become important factors in assessing whether the customer was misled. Overseas futures, FX, and CFDs are high-risk derivative products with significant volatility and potential for loss. Therefore, statements implying fixed or stable profits may be viewed unfavorably if they are inconsistent with the actual trading structure and risk profile. 2. Intent to Act in the Customer’s Interest Another key issue is whether the operator genuinely intended to pursue the customer’s investment interest. If the operator’s referral commission increased according to the customer’s trading frequency or trading volume, regardless of whether the customer made a profit or loss, investigators may question whether the operator prioritized referral income over the customer’s investment outcome. For example, if a customer states that they would not have invested had they known that substantial trading fees and referral commissions would be generated, the failure to disclose that fee structure may be considered a form of deception by omission. Issues Under the Capital Markets Act 1. Scope of Quasi-Investment Advisory Business Under Article 101 of the Capital Markets Act, a quasi-investment advisory business generally refers to a business that provides non-individualized investment advice on financial investment products to an unspecified number of clients for consideration, through publications, communications, broadcasts, or similar means. Paid investment advice provided through interactive channels such as KakaoTalk, Telegram, or open chat rooms may go beyond the permissible scope of quasi-investment advisory business and may be regulated as investment advisory business. A quasi-investment advisory business registration alone does not generally allow the operator to provide specific one-on-one instructions to individual users, such as entry points, liquidation timing, stop-loss levels, or take-profit levels. Such conduct may raise issues of unregistered investment advisory business under Articles 17 and 445(1) of the Capital Markets Act. 2. Possible Unregistered Discretionary Investment Management Business In a copy trading structure, if the operator uses a customer’s account, API access, or trading authority to substantially control the management of the customer’s assets, the business may be examined as a possible unregistered discretionary investment management business. Discretionary investment management generally involves managing a client’s assets by making investment decisions on behalf of the client. If the operator goes beyond simply providing market information and effectively controls trading decisions and execution, the conduct may fall within the scope of regulated financial investment business. 3. Possible Unauthorized Investment Brokerage Business If the operator actively directs users to a specific overseas broker, assists with account opening, deposits, or trade execution, and receives commissions in connection with that activity, the structure may raise issues of unauthorized investment brokerage business under Articles 11 and 444(1) of the Capital Markets Act. Simply posting a link or introducing a broker does not automatically amount to investment brokerage. However, if the operator provides account-opening guidance, deposit instructions, trading education, product-specific recommendations, and receives referral commissions, Korean authorities may review the overall business structure to determine whether the operator was effectively engaging in regulated financial investment business. Practical Response During an Investigation In these cases, investigative authorities tend to focus on the operator’s ability, intent, disclosure practices, and the actual structure of referral compensation. Because statements made during the early stages of an investigation may later become important evidence in court, it is important to review the legal structure of the business as soon as the operator is contacted by the police or another investigative authority. Key issues to review include: Whether customers were properly informed of the risks of margin trading, leverage, forced liquidation, and fee structures Whether expressions such as “guaranteed profit,” “stable return,” or “principal guaranteed” were used Whether the current business model falls within the permissible scope of a quasi-investment advisory business How the referral commission structure is connected to customers’ trading volume, trading frequency, or investment performance DECENT Law Office’s Digital Asset and Financial Investment Team advises on criminal and regulatory matters involving MetaTrader-based overseas futures signal services, copy trading structures, referral commission models, and related Capital Markets Act issues. If you have received a criminal complaint, a police summons, or notice of a preliminary investigation, or if you wish to review whether your current business structure is legally appropriate under Korean law, it is important to first examine the specific facts and operational details of the business.
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Criminal Risks and Terms of Service Issues for Crypto Investment Information Providers in Korea
Criminal Risks in Operating Crypto Investment Information Services As the virtual asset market continues to grow, services such as crypto trading signal rooms, paid investment information memberships, and crypto advisory-style services have become increasingly common in Korea. At the same time, regulatory scrutiny over paid investment information services has been increasing. According to the Financial Supervisory Service’s 2024 inspection results for quasi-investment advisory businesses, violations were found in 112 out of 745 businesses reviewed, including cases involving unregistered investment advisory activities. While these figures do not directly relate only to virtual asset cases, they show that Korean regulators are paying closer attention to paid investment information services in general. In practice, disputes that begin as refund complaints may escalate into criminal complaints involving fraud, violations of the Financial Investment Services and Capital Markets Act, or violations of the Act on Reporting and Using Specified Financial Transaction Information. In these cases, terms of service, contracts, refund policies, and user communications often become key evidence. This article explains the major legal issues that may arise and why terms of service should be reviewed carefully before a dispute develops into a criminal investigation. Key Laws That May Apply Issue Main Legal Point Potential Penalty Fraud Obtaining property or financial benefit through deception Under the current Criminal Act, imprisonment for up to 20 years or a fine of up to KRW 50 million. The applicable law may vary depending on when the alleged conduct occurred. Capital Markets Act Violation Unregistered investment advisory activities may become an issue where the service involves security tokens or is combined with financial investment product advisory services Imprisonment for up to 3 years or a fine of up to KRW 100 million Specified Financial Transaction Information Act Violation Operating as an unregistered virtual asset service provider Imprisonment for up to 5 years or a fine of up to KRW 50 million E-commerce Law Violation Improper restriction of cancellation, withdrawal, or refund rights Administrative fines, corrective orders, or other administrative measures Administrative sanctions and criminal penalties may proceed separately. Depending on the facts, the same business conduct may give rise to more than one legal issue. Why Terms of Service Become Evidence in Criminal Investigations When a refund dispute turns into a criminal complaint, investigators often review the terms of service and user agreements at an early stage. Terms of service can show what kind of service the business claimed to provide, how it explained investment risk and refund conditions, and whether the actual operation matched what was written in the documents. In particular, investigators may compare the terms of service with the actual sales process, user communications, and service operation in the following areas. 1. Fraud and Deceptive Conduct For fraud allegations, investigators do not look only at whether the user suffered a loss. They examine what the business told the user, whether the possibility of loss was clearly explained, whether any statements implied guaranteed profits, and whether the written terms matched the actual service. If the terms of service clearly state that investment losses may occur and that the service does not guarantee profits, and if similar explanations were repeatedly given during consultations or user communications, these records may help dispute allegations of deception. On the other hand, if the terms contain disclaimers but the actual sales process included statements similar to “guaranteed profits,” “loss recovery,” or “risk-free trading,” the inconsistency between the written terms and the actual operation may become unfavorable evidence. 2. Capital Markets Act Issues Capital Markets Act issues do not automatically arise in every crypto investment information case. However, if the relevant virtual asset may be treated as a security token or if the service is connected with stock, derivatives, or other financial investment product advisory services, the operation may be reviewed under the Capital Markets Act. For example, even if the terms describe the service as “general information provided to an unspecified number of users,” the actual operation may still become problematic if it involved one-on-one recommendations, bidirectional paid chat rooms, or personalized investment judgments. In that situation, the terms of service may be compared against how the service was actually operated. 3. Virtual Asset Service Provider Issues Under the Specified Financial Transaction Information Act, a business may be required to register as a virtual asset service provider if it is not merely providing information but is also involved in virtual asset transactions, brokerage, transfer, custody, or management. Even if the terms of service define the business as an information service, the actual operation may be reviewed differently if the company handled user assets, executed trades, assisted repeated transfers, or received fees for transaction-related services. Supreme Court Guidance on Virtual Asset Service Provider Status In a case involving the Specified Financial Transaction Information Act, the Supreme Court of Korea held that a person may generally be regarded as a virtual asset service provider if they continuously and repeatedly conduct virtual asset transactions for the benefit of unspecified customers or users and receive compensation for doing so. This means that the actual substance of the service matters. If the business repeatedly participates in transactions and receives fees, it may be difficult to rely only on written terms stating that the service is limited to information provision. Key Issues to Review at the Early Investigation Stage For operators of crypto investment information services, the early stage of an investigation is critical. The following issues should be reviewed first. First, the consistency between the terms of service and actual operation should be checked. This includes the scope of service, refund conditions, risk disclosure language, and how the service was actually provided to users. Second, businesses should review whether any terms, advertisements, landing pages, chat messages, or sales scripts could be interpreted as guaranteeing profits or compensating losses. Since the 2024 amendments to the Capital Markets Act, restrictions on quasi-investment advisory businesses have been strengthened, including rules related to bidirectional channels and misleading profit-guarantee advertisements. Third, the communication channel should be reviewed. Whether the service was operated as a one-way information channel or as a bidirectional advisory channel may affect the legal assessment. Fourth, the initial statement to investigators should be prepared carefully. If the operator explains the terms inaccurately or gives statements that do not match the actual operation, it may become more difficult to defend the case later. DECENT Law Firm’s Virtual Asset Practice Team Cases involving crypto investment information services often involve multiple legal issues at the same time, including fraud, the Capital Markets Act, the Specified Financial Transaction Information Act, and e-commerce regulations. DECENT Law Firm’s Virtual Asset Practice Team assists clients from the early investigation stage by reviewing terms of service, service operation records, user communications, refund policies, and the legal issues relevant to each allegation. If you have been contacted by Korean investigative authorities, or if a refund dispute may escalate into a criminal complaint, it is important to review your response strategy before the first statement is given. This content is provided for general informational purposes only and does not constitute legal advice for any specific case.
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Unlisted Stock Investment Fraud in Korea: Can You Recover Your Money?
Current Trends in Unlisted Stock Investment Fraud Unlisted shares are shares that are not traded on a public stock exchange. In Korea, these shares are often sold through private transactions, intermediaries, or over-the-counter channels. Because pricing information is not publicly available and the transaction process is often opaque, unlisted stock investments can easily become a source of fraud. A common pattern involves inducing investors to pay large sums based on claims such as “the company will soon be listed” or “a KOSDAQ listing is imminent.” Victims often wait for years, believing that the listing has simply been delayed, and may not realize that they have been defrauded until much later. Recently, fraud schemes have become more sophisticated. Rather than selling shares that do not exist, some perpetrators sell shares that actually exist but are of little value, inducing victims to purchase them at prices dozens of times higher than their real market value. Because the shares themselves may exist, victims often find it difficult to recognize the fraud at an early stage. This article explains the laws and court precedents that may apply to unlisted stock investment fraud in Korea, as well as the legal options available for recovering investment losses. Applicable Laws Several Korean laws may apply to unlisted stock investment fraud cases, depending on the facts, the amount of damage, and the role of each participant. Category Main Issue Statutory Penalty Fraud Obtaining money or property by inducing investment through false information Article 347 of the Korean Criminal Act: imprisonment for up to 10 years or a fine of up to KRW 20 million Aggravated Fraud Fraud involving damages of KRW 500 million or more Article 3 of the Act on the Aggravated Punishment of Specific Economic Crimes: imprisonment for at least 3 years Illegal Fund-Raising Receiving investment funds without authorization while promising principal or profit guarantees Articles 3 and 6(1) of the Act on the Regulation of Conducting Fund-Raising Business Without Permission: imprisonment for up to 5 years or a fine of up to KRW 50 million Violation of the Capital Markets Act Conducting unregistered investment advisory or discretionary investment management business Article 444 of the Financial Investment Services and Capital Markets Act: imprisonment for up to 5 years or a fine of up to KRW 200 million Depending on the scale of the damage and the manner of involvement, multiple charges may apply at the same time. Key Factors in Determining Fraud For fraud to be established in an unlisted stock investment case, the investigative authorities must examine whether there was deception and fraudulent intent at the time of the transaction. The Supreme Court of Korea has held that: “Unless the defendant confesses, fraudulent intent, which is a subjective element of fraud, must be determined by comprehensively considering objective circumstances such as the defendant’s financial condition before and after the act, the surrounding circumstances, the nature of the transaction, and the process of performance.” — Supreme Court Decision 2015Do10570, December 27, 2019 In other words, even if the perpetrator claims that they genuinely believed the company would be listed, investigative authorities and courts may still find fraudulent intent based on objective facts, such as the company’s financial condition, false explanations, and how the investment funds were used. In practice, investigators often focus on the following circumstances: False listing schedule: whether the perpetrator stated a specific listing timeline despite the lack of any realistic basis. Misuse of investment funds: whether the money was used for purposes different from what was promised to investors. Impossibility of performance: whether it was impossible from the beginning to transfer the shares or perform the promised obligations. Active involvement of intermediaries: whether an introducer or broker received commissions or directly participated in persuading the investor. Fraud organizations may also attempt to avoid liability under the illegal fund-raising regulations by avoiding direct phrases such as “principal guarantee.” Instead, they may use indirect expressions such as “repurchase commitment if listing fails” or “compensation for the difference if the public offering price is lower than expected.” Under Korean court practice, these types of clauses may still be interpreted as an agreement to preserve principal or profits under Article 2 of the Act on the Regulation of Conducting Fund-Raising Business Without Permission. Legal Strategy for Recovering Investment Losses Filing a criminal complaint does not automatically result in the recovery of the invested funds. In many cases, both criminal and civil procedures must be considered together. A criminal complaint can be useful because it allows investigative authorities to trace the flow of funds and secure evidence through compulsory investigation. If search and seizure is conducted at an early stage, it may help identify relevant accounts and determine where the investment funds went. Civil asset preservation measures, such as provisional attachment, are also important. These procedures are designed to freeze the perpetrator’s assets before they are disposed of or transferred. In many cases, filing for provisional attachment at the same time as, or shortly after, the criminal complaint can improve the possibility of recovery. The likelihood of recovery usually depends on the following factors: Assets held by the perpetrator: real estate, bank deposits, or other identifiable assets may be subject to provisional attachment. Traceability of funds: clear bank transfer records and account flows can make recovery more realistic. Scope of accomplices: if introducers, recruiters, or account holders were involved, it may be possible to pursue claims against those whose assets can be identified. Timing of response: the earlier the response, the more legal options may remain before the perpetrator disappears or disposes of assets. In unlisted stock investment fraud cases, the question is not only whether a criminal complaint can be filed. It is equally important to determine who should be targeted, what assets may be preserved, and which legal procedures should be pursued first. Review by DECENT Law Firm’s Criminal Defense and Fraud Response Team Unlisted stock investment fraud cases require a comprehensive legal review. The key issues include whether fraud can be established, whether accomplices can be identified, whether assets can be preserved, and how criminal and civil procedures should be coordinated. DECENT Law Firm’s criminal defense and fraud response team has handled unlisted stock investment fraud cases from the criminal complaint stage through asset preservation and recovery strategy. If your investment has not been returned, or if the person in charge has stopped responding, it is important to review your situation before more time passes. This content is provided for general informational purposes only and does not constitute legal advice for any specific case.
