South Korea Court Suspends Sentences in $36,200 Crypto Fraud Case Despite Real Listing Push

"It’ll be listed soon and make you a fortune" — the promise that left a crypto investor burned

Promise of a listing on a major exchange within 90 days

Sold 1.25 million coins and pocketed $36,200

$289,900 in development costs went unpaid, listing review was also rejected

It took 3 years and 8 months to get the principal back

Two company officials who sold an investor $36,200 worth of cryptocurrency by falsely claiming the token would be listed on a major South Korean exchange within 90 days were given suspended prison terms. They had also promised to return the principal if the token was not listed on time. But court records showed they had not even fully paid the development costs needed for the listing at the time. The court held that fraud can be established if investors were solicited despite knowing there was no basis to guarantee a listing within that deadline, even if efforts to pursue a listing were real.

According to the legal community on Oct. 8, Judge Kwon Min-jung of the Seoul Eastern District Court sentenced a man in his 50s identified only as A and a man in his 40s identified only as B on Sept. 11 to six months in prison, suspended for two years, on fraud charges. Both later appealed.

The two were indicted for taking $36,200 from an investor in October 2022 while promoting a play-to-earn, or P2E, coin business that would reward users with cryptocurrency for playing games. Prosecutors said they guaranteed both a listing and the return of principal. A was a shareholder in the token issuer and handled domestic exchange listing work. B was an in-house director responsible for finance and accounting.

B told the victim, who had been introduced through an acquaintance, that the company’s token would soon be listed on a major South Korean exchange and that the price could surge after listing, generating large gains. He also said the company usually dealt only with corporations or large investors, but would offer this small investment opportunity because of the personal introduction.

The pair signed a contract with the victim on Oct. 7, 2022 to sell 1.25 million coins at 40 won apiece. The contract stated that the token would be listed within 90 days on major domestic exchanges including Upbit, Bithumb and Coinone. It also said the company would buy back the coins at the same price if the listing did not happen by then. Believing those terms, the victim wired a total of $36,200 in two transfers on Oct. 7 and Oct. 11.

In reality, the listing had not been secured. The token had only passed Coinone’s preliminary listing review on Oct. 5, 2022, two days before the contract was signed. The company had not even submitted the documents required for the main review, which evaluates business viability and financial soundness. Coinone ultimately notified the company in December 2022 that the listing review had been rejected. The company did not apply to Bithumb until November, after the contract had already been signed, and withdrew that application the same month citing internal circumstances.

Development of the game meant to support the token’s value was also running into trouble. The company had agreed to pay a game developer $724,600 but paid only $434,800. The developer had been pressing for the unpaid balance and warning of contract termination since August 2022, before the investment contract with the victim was signed. It eventually notified the company in November and December 2022 that the contract would be terminated.

The court focused on the fact that B set the 90-day listing deadline without any objective basis even though he knew those circumstances. It also pointed to a message he sent the victim in January 2023, after efforts to secure a domestic exchange listing had already fallen through, saying in effect that a listing was still underway at one of the major exchanges.

A argued that he had not directly consulted with the victim about the investment and had not properly read the contract. The court rejected that defense. It said A directly handled domestic exchange listing work and knew about the payment dispute with the game developer, meaning he was aware that a listing would be difficult.

“The defendants deceived the victim by saying the listing would take place while at least conditionally recognizing and accepting the possibility that this coin would not be listed on a domestic exchange within 90 days,” the court said. It added that the fact they had actually pursued a listing, or later bought more of the token themselves, did not negate criminal intent.

The victim did not recover the investment principal until June 2026, about three years and eight months after signing the contract. The court also said the victim would not have entered into the deal in the first place if he had known it would take that long to get the principal back.

The court did, however, take into account that the victim ultimately received a total of $43,500, exceeding the principal, and that B had reached a settlement with the victim. It also considered that B had no prior record and that A had no prior convictions for similar crimes. Although A had not been forgiven by the victim, the court said his role in leading the crime was not greater than B’s, and suspended the prison terms for both men.

Choi Young-chong, Hankyung.com reporter youngchoi@hankyung.com