[Edaily Reporter Choi Hoon Gil ] “(The KOK defendants and their associates) probably thought, ‘What good will it do if the victims, scattered like grains of sand, make a fuss?’”

These were the words of a witness who appeared at the trial for the KOK Coin (KOK Token) multi-level marketing (MLM) fraud case held at the Ulsan District Court on the 7th. Sighs erupted from various parts of the courtroom when this statement was made during the trial, which lasted about five hours and was attended by key defendants, including Mr. Kim. ·

The KOK case is a multi-level marketing scam that, according to prosecutors’ estimates, defrauded a total of 570,707 people both domestically and internationally, resulting in total losses of 2.5759 trillion won. Starting in 2019, the ring leaders issued KOK Coin and attracted investors by touting deposit rewards and multi-level marketing. They promoted the scheme by claiming there would be no loss of principal and that investors could earn monthly returns of up to hundreds of millions of won.

However, as the so-called “ponzi scheme” became unsustainable in 2021–2022, they shut down the service and embezzled the investment funds. The price of the KOK coin plummeted from as high as $7 to less than $0.10, and investors were unable to recover even their initial deposits. Currently, the main defendants are standing trial in the first-instance criminal proceedings at the Ulsan District Court without being detained.

This case caused damages amounting to approximately 2.5 trillion won to over 570,000 domestic and international investors. Yet, does it seem as though the perpetrators are not afraid of punishment? While covering the KOK Coin case in last week’s inaugural investigative report for “Crypto X-Files,” three numbers stuck in my mind: “174 billion won,” “1.9 days,” and “13 vs. 0.” I sought the answer to this question through these numbers.

174 billion won… Funds siphoned off just as victims’ withdrawals were blocked

Following a tip received by the “Crypto X-File Project for Reporting Digital Asset Fraud and Tax Evasion” and a subsequent request to Core Security to track on-chain fund flows, it was revealed that the syndicate embezzled 174 billion won between 2021 and 2022.

While investors were suffering in silence, unable to recover even the funds they had deposited through staking and other means, the ringleaders were intensively siphoning off and concealing funds. The 174 billion won revealed in this investigation is merely “the tip of the iceberg” compared to the total estimated losses of 2.5 trillion won cited by prosecutors.

So how were the perpetrators able to embezzle such a massive sum—174 billion won? The key lay in overseas cryptocurrency exchanges. Although they used some domestic exchanges as well, the primary money-laundering channels identified during the investigation were the Chinese-based cryptocurrency exchanges KuCoin and Huobi (now HTX).

The gang had been siphoning off victims’ funds using the dollar-pegged stablecoin Tether (USDT) for over four years. The KOK Foundation was established in the Republic of Seychelles in 2019, and Medium—which later acquired the operating rights to the KOK business—was also based overseas as a Hong Kong-registered entity.

January 9… Funds Hidden Instantly Immediately After Crime Reports

According to an analysis by Core Security’s Digital Financial Crime Response Research Institute, funds began flowing overseas an average of 1.9 days after reports of crypto-related crimes were published. Immediately after domestic reports on crypto-related crimes emerged, there were also signs of Tether (USDT) flowing out of domestic crypto exchanges to Binance.

During this period, the growth rate of Tether trading volume reached as high as 88%. This means that the movement of funds can begin in earnest in less than two days after allegations of virtual asset crimes become public. Although this analysis was based on general reports of virtual asset crimes, it can also be applied to the KOK Coin case. This highlights just how crucial an initial response is to prevent the rapid movement of criminal funds.

The question is whether the close cooperation system among exchanges, financial authorities, and investigative agencies functioned properly at the time of the KOK case. It is necessary to examine whether there was sufficient coordinated response—where the exchange detected suspicious transactions through its Fraud Detection System (FDS), financial authorities swiftly activated their monitoring network, and investigative agencies immediately launched an initial investigation. The current joint investigation system for virtual asset crimes was not established until 2023. It is necessary to verify whether this coordinated cooperation system remains operational even now.

13 to 0… KOK’s Defense Counsel vs. Victims’ Counsel

“13 to 0” refers to the ratio of defense attorneys representing the KOK Coin case defendants to those representing the victims. The main defendants in the KOK Coin case have assembled a large defense team, including a lawyer who was once on the shortlist of four candidates for the first Commissioner of the Major Crimes Investigation Agency. However, the victims’ side is struggling to afford litigation costs—with retainer fees alone amounting to tens of millions of won—and has been unable to retain adequate legal representation.

Consequently, during witness examinations in court on the 7th, one observer even remarked, “It’s frustrating that while the defendants have hired more than 13 lawyers, not a single lawyer for the victims is in sight.” This is also why the victims fear a “lenient sentence” ahead of the court’s ruling—because despite the massive financial losses, there remains a significant disparity in legal resources between the defendants and the victims.

Another concern for the victims is that public interest in the KOK Coin case has rapidly waned. Just a few years ago, the KOK case was a major issue in parliamentary oversight hearings, leading to the summoning of witnesses and their testimony. However, the situation has gone quiet since the start of this year.

This sets a dangerous precedent, as the perpetrators cleverly evaded the scrutiny of financial regulators and the investigations of law enforcement by operating through domestic and international virtual asset exchanges—and there are still victims suffering. With virtually nothing resolved, concerns are emerging that “the case might simply be swept under the rug” as several years have passed since the incident occurred.

U.S. Hands Down Life Sentence for Ponzi Scheme That Defrauded Over 30,000 People

This situation stands in contrast to that in the United States. At the Federal Bureau of Investigation (FBI) headquarters in Washington, D.C., the Bernard Madoff case is on public display under the title “The King of Fraud.” Madoff, who perpetrated a “Ponzi scheme” targeting some 37,000 investors across 136 countries, was sentenced to 150 years in prison in 2009 and died in prison in 2021 while serving his sentence.

This case is displayed alongside the Watergate scandal—which led to President Nixon’s resignation—as one of the “FBI’s Major Cases of All Time.” Visitors can view detailed information, including Madoff’s photograph, the nature of the crime, the scale of the losses, and the methods used in the fraud. This serves as a symbolic example of how seriously the United States views fraud cases that undermine trust in the capital markets.

“Korea is a boiling pot.” This is a favorite saying among scammers. It implies that while public opinion may boil over at first, both media coverage and public interest rapidly fade after just a few years. The fact that the phrase “victims as numerous as grains of sand” was even uttered in court on the 7th is not unrelated to this reality.

Fraudsters are still laughing, confident that if they change their company name in a few years, package their scheme as a new IT technology, enlist influential figures to promote the business, and promise high returns, investors will flock back.

Cryptocurrency Scams Can Ruin Your Life

In an interview with Edaily, Ms. Rita, a victim from Vietnam, responded to the question, “Why did as many as 570,000 people (according to prosecutors’ estimates), including foreigners, become victims of the KOK Coin case?” by saying, “It’s because they trusted the Korean brand.”

She characterized the KOK case as “an organized, transnational financial fraud that exploited the Republic of Korea’s brand” and urged severe punishment, stating, “Over the past few years, the South Korean government and judiciary have been far too lenient toward this type of economic crime.”

Unless the perception that “committing fraud with cryptocurrency leads to ruin” becomes a reality, cases like the KOK Coin scandal are likely to recur. In fact, criminals may even emerge who use the tactics from the KOK Coin case as a blueprint to lure investors in even more sophisticated ways. Such temptations are likely to increase, especially during times like now when cryptocurrency prices are rising.

Such fraud does not merely stop at depriving victims of their assets. It can erode trust in the entire digital asset market and hinder even legitimate businesses trying to operate properly. Furthermore, it can have a negative impact overseas, damaging the value and trust associated with Korean brands by spreading the perception that “trusting Koreans leads to disaster.”

This is why the outcome of the first-instance criminal trial for the KOK Coin case is so important. Although several years have passed since the incident occurred, key challenges remain: △thorough tracking of victims’ deposited funds; △prompt investigation by the court and law enforcement agencies to establish the facts and strictly punish those responsible; and △the swift repatriation of fugitives who have fled overseas and are subject to red notices. This is why we must pay close attention to the trial dates at the Ulsan District Court (October 12 at 2:00 p.m. and November 16 at 2:00 p.m.), which will take place around the time of the National Assembly audit.

[Crypto X-File No. 1 Investigative Report – The KOK Coin Case] ①–⑦

<[Exclusive] Victims’ Funds Frozen, Yet 120 Billion Won Embezzled… The First Investigation into KOK Coin>
<[Exclusive] A Look at the KOK Ringleader’s Wallet… Over 50 Billion Won Cashed Out via Chinese Exchanges>
<“Estimated Losses Alone Reach 2.5 Trillion Won”—What Is the KOK Coin Case All About?>
<Tether Transfers Abroad Surge 88% Immediately After Crime Report… “Early Investigation Is Crucial”>
<“KOK Coin: A Transnational Scam Exploiting the Korean Brand”>
<Even When Caught, They Slip Through the Cracks… Cross-Border Cryptocurrency Crime Makes Investigations “An Uphill Battle”>
<To Prevent a Second KOK Crisis… Hwang Seok-jin: “On-chain Analysis Is an Essential Investigative Technique”>

※“Choi Hoon Gil’s Behind-the-Scenes” is a series of articles that shares the untold stories behind current issues and policy discussions.