Police and exchanges traced 1,050 digital wallets

26.37 billion won returned to 1,137 phishing victims

Unexpected windfall for those who had given up hope

Voice phishing [Yonhap]
Voice phishing [Yonhap]

Police have recovered 26.3 billion won ($19.5 million) for 1,137 victims of voice phishing fraud who had lost large sums and suffered in silence. Cryptocurrency exchanges had frozen accounts suspected of holding phishing proceeds but were unable to identify the victims, leaving the funds in limbo until police traced the money flows and tracked down each victim one by one.

The Seoul Metropolitan Police Agency Metropolitan Investigation Unit announced Tuesday that over three years it had located 1,137 voice phishing victims and returned 26.37 billion won that had been locked in virtual asset exchanges.

Tracing 1,050 crypto accounts

A significant portion of phishing proceeds flows into virtual asset wallets, as criminal organizations use cryptocurrency to launder money or temporarily conceal funds. In response, virtual asset exchanges began freezing accounts once they identified illicit funds.

But that was as far as the process went. Victims had no legal basis to reclaim money sitting in frozen accounts. Under the Act on Special Cases Concerning the Prevention of Loss Caused by Telecommunications-Based Financial Fraud, victims can seek relief only from financial companies such as banks. Cryptocurrency exchanges, which receive no victim information from banks, were left holding frozen criminal proceeds with no way to return them.

Once police became aware of this gap, they began working with major virtual asset exchanges in September 2023 to launch a victim-recovery effort. They combed through transaction records for 1,050 digital wallets that five domestic exchanges had frozen since 2017 due to suspected phishing proceeds. The investigation identified all 1,050 frozen accounts, pinpointing around 26.3 billion won in victim funds. Police then analyzed links to bank accounts and, as of Sept. 15, had returned the money to 1,137 victims.

Victims reclaim money they had written off

Thanks to the three-year investigation, victims recovered money they had long since given up on.

A 56-year-old office worker surnamed Lee living in Sejong lost 95 million won last year to a voice phishing scammer posing as a savings bank employee. He reported the fraud after realizing he had been deceived, but the account he had transferred the money to was already empty.

Lee had no idea his money had flowed into a virtual asset exchange and had effectively given up on recovering it. He had not even told his family about the fraud, suffering in silence — until police returned 22 million won to him.

A 46-year-old housewife surnamed Park living in Incheon also fell victim to voice phishing last year, losing 40 million won. She recovered half that amount. Like Lee, she reported the fraud only after realizing she had been scammed, by which point the bank account she had sent the money to was already empty — and she had no idea the funds had been moved into a virtual asset account.

Closing the regulatory blind spot for crypto exchanges

Starting Thursday, this regulatory blind spot will be eliminated. An amended telecommunications fraud relief act takes effect Thursday, bringing virtual asset exchanges under the legal definition of "financial companies," on par with banks. Even when phishing proceeds pass through a bank account and into a cryptocurrency exchange, victim and fund information can now be shared, exchange accounts can be frozen, and the money returned to victims.

Funds converted into virtual assets will also be recognized as victim assets and included in the scope of eligible refunds. If a victim wishes, the exchange will be able to sell the relevant virtual assets and return the proceeds in cash.

Meanwhile, police said they will continue investigating 130 individuals who allegedly disposed of about 3.04 billion won in victim funds immediately after freeze periods expired, on charges of violating the Act on Regulation and Punishment of Criminal Proceeds Concealment.

"We have been supplementing the limits of laws and systems through proactive policing," a police official said. "From October onward, even if phishing proceeds flow into a virtual asset exchange, victims who promptly apply for a payment suspension can expect a much faster recovery."


kido@heraldcorp.com