5 million won ($3,530). 100 million won. Another 100 million won.
On Aug. 4, money began moving out of a bank account belonging to a man in his 60s identified only as A — who held 5 billion won in financial assets at a brokerage — and into a virtual asset exchange, one transfer per minute. The first was 5 million won, a so-called test transfer. Once that cleared, transfers of 100 million won followed in rapid succession. A hastily sold 250 million won worth of shares to raise the funds, then used the exchange to buy dollar-pegged stablecoins. The total transaction volume reached 500 million won.
Every one of those transactions was carried out on the instructions of a voice phishing ring that had been grooming A for a month. The fraudsters built trust through repeated contact before telling him he could earn returns by investing in companies tied to the US government, and directed him to fund the investment using dollar stablecoins.
A bank employee stopped the fraud. After detecting the suspicious transactions, the employee immediately contacted the exchange and requested a payment suspension — blocking the withdrawal just before A was about to transfer the coins to the phishing ring's digital wallet.
In about two months, virtual assets used in voice phishing schemes like this one will be included in the scope of victim compensation. Exchanges will be required, as banks already are, to proactively detect suspicious transactions and suspend payments.
There are concerns, however, that the same post-freeze management gap seen in the banking sector could repeat itself in the virtual asset market — where exchanges that proactively freeze suspicious assets may end up releasing them due to complaints if no victim comes forward. The industry is calling on authorities to establish a legal mechanism, such as a formal deposit system, that would allow exchanges to hold suspect coins separately rather than keeping them frozen indefinitely on their own authority.
According to financial regulators, an amendment to the Telecommunications Fraud Victim Compensation Act taking effect in October will expand the scope of voice phishing victim relief from cash to virtual assets.
The core of the amended law is a framework allowing virtual assets used in voice phishing to be frozen, subjected to a debt-extinguishment procedure, and then returned to victims based on the type and quantity of assets involved.
Exchanges will also face greater responsibilities. They will be newly required to continuously monitor for suspicious voice phishing transactions and suspend payments on accounts suspected of criminal involvement.
Under the amended law, exchanges must conduct ongoing checks of user accounts and, if a transaction is suspected of being linked to voice phishing, delay or temporarily halt the transfer of virtual assets. They must also verify the purpose of customer transactions, and if there are grounds to suspect an account is being used for fraud, freeze it and proceed through the debt-extinguishment process to compensate victims.
Where exchanges previously only froze suspicious assets when asked to do so by investigators or banks, their role will now extend from prevention through to victim relief.
The problem arises when an exchange proactively freezes a suspicious account or wallet through its own monitoring, but no victim report follows.
In fact, the financial sector has repeatedly flagged that even when a fraud-suspected account is proactively frozen, there is no clear follow-up procedure for handling the remaining funds if no victim comes forward. The argument is that rather than returning funds with strong signs of fraud involvement to the account holder, a post-freeze management mechanism is needed — one that allows the government to reclaim the assets or hold them separately so criminals cannot retrieve them.
Given recent voice phishing tactics, exchanges are expected to accumulate a significant volume of frozen virtual assets with no accompanying victim reports. The rise of investment advisory chat rooms and scams disguised as virtual asset investment schemes means many victims believe they are making legitimate investments rather than recognizing they have been defrauded.
For the time being, because there are no clear standards for handling assets frozen without a victim report, exchanges are understood to be maintaining withdrawal restrictions based on Article 17 of the enforcement decree of the Act on Protection of Virtual Asset Users — which sets out legitimate grounds for blocking deposits or withdrawals — along with their own internal criteria.
Against this backdrop, the industry is calling for the use of a formal deposit system as a concrete method for separately holding coins accumulated in fraud-suspected accounts. The proposal is that instead of exchanges freezing suspicious assets indefinitely on their own judgment, assets meeting certain conditions could be transferred into a deposit procedure, giving exchanges a clear legal basis for holding them. A deposit system is a regime under which assets that cannot immediately be paid to a specific party are placed with a court deposit office for safekeeping.
Unlike banks, which hold suspected fraud funds in won, exchanges must freeze and hold the virtual assets themselves — assets whose prices fluctuate constantly. That makes it necessary to clarify the legal basis and responsibility under which those assets are held, regardless of who physically stores them. The current deposit system, however, covers only cash, securities, and tangible goods that can be physically stored, making it difficult to deposit virtual assets such as bitcoin or ether as they are.
Experts say the system must be reformed to extend the scope of depositable assets to include virtual assets. "Even if an exchange freezes assets, a situation can arise where no claimant appears — leaving the exchange unable to keep holding them but also unable to release them arbitrarily," said Hwang Seok-jin, a professor at Dongguk University's Graduate School of International Information Security. "The scope of depositable assets needs to be expanded to include virtual assets that have recognized financial value."
Even if virtual assets were included in the deposit system, the actual custody would likely remain with exchanges or specialized custodians, since court deposit offices are not equipped to hold virtual assets directly. "Even if the physical storage location stays the same — the exchange — the nature of the assets changes from coins frozen at the exchange's own discretion to deposited assets held under a formal legal procedure," an industry official said. "That would give exchanges a clear basis for holding them."
kyoung@heraldcorp.com
forest@heraldcorp.com
