Crypto investors in Korea exposed to frauds amid absence of rules and watchdog

Korean cryptocurrency investors mostly in their 20s and 30s swept up in the craze over virtual coin are exposed to fraudsters and schemers due to absence of regulations and supervisory body even as hundreds are in waiting to join some 200 exchange websites active in Korea.

All crypto exchanges operating in Korea must register with the Financial Services Commission by Sept 24. Schemers are at their peak to profiteer from the volatility before digital coins go under scrutiny.

For now, anyone can launch a token and sell them in the 200-some exchange platforms as there are no set rules in listing digital assets.

The launcher can showcase its token through the exchange platform for a fee, a means called initial exchange offering, or directly trade it on a platform. Companies of sound names or credentials and startups backed by legitimate funding can easily list their coins. The issuer decides on the volume depending on the demand.

An initial coin offering, which is equivalent to the initial public offering of the conventional securities, is not allowed in Korea.

When a new crypto token applies for listing with an exchange, the platform operator conducts a review on the coin technology and issuer’s credentials. The credibility of the documents relies on the issuer. Disclosures are rare to give idea about the validity and prospects of the coin.

Foul play, therefore, is not difficult.

Arowana Token, which stirred up the market with price skyrocketing 100,000 percent in just 30 minutes after going on a Seoul-based exchange last week, had key company members taken out from the final document right before the listing took place.

Xtock, a crypto currency delisted last year, had no background information about the company’s chief executive officer other than the person’s name. Its outstanding tokens are unknown. Investors have not been able to get in touch with the company.

Delisting is as easy as listing, instantly sending the investors’ money down the drain.

Some 20 crypto currencies had been delisted from the country’s top four crypto exchanges so far this year.

Fraudsters also are common. Brokers match the rich with crypto developers and consultants charge fees for designing a seemingly robust trading curve for a new coin. They collectively move to drive up the price after the crypto currency is listed then dump the shares for profit, causing a big price fall and damage to other investors.

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