Prosecutors appeal first-instance ruling in the first case under the Virtual Asset User Protection Act

Prosecutors have appealed the first-instance verdict in the case of the head of a coin management firm who was indicted on charges of manipulating virtual-asset prices to secure illicit gains.

The Seoul Southern District Prosecutors’ Office said in a press release on the 10th that it filed an appeal on the grounds of a misunderstanding of legal principles, a mistake of fact, and an improper sentence, challenging the first-instance court’s view that “the amount of illicit gains obtained by the defendants in this case cannot be calculated accurately, making it impossible to order forfeiture.” The defendants also all submitted notices of appeal, meaning both sides have appealed, and the case is expected to be heard at the appellate level by the Seoul High Court.

On the 4th, the Seoul Southern District Court sentenced Mr. Lee, the head of Company A’s coin business who was detained and indicted on charges of violating the Virtual Asset User Protection Act, to three years in prison, a fine of 500 million won, and forfeiture of about 846 million won. A former employee of the company, who was also detained and indicted, was sentenced to two years in prison, suspended for three years.

The court found the price manipulation and illicit-gain acquisition to be guilty, but ruled that the prosecution had not sufficiently proved the alleged illicit gains of about 7.1 billion won and therefore found that portion not guilty for stated reasons. A “not guilty for stated reasons” ruling refers to a case where the court generally finds guilt but deems some charged facts—legally in a single-offense relationship—not guilty, and does not separately declare an acquittal in the order section, instead stating the acquittal only in the reasoning.

Prosecutors said they plan to strengthen the supporting proof and explanations in the appellate trial so that forfeiture can be ordered, as requested, for the alleged illicit gains worth about 7.1 billion won, and to ensure a thorough maintenance of the indictment.

This case is the first alleged violation of the Virtual Asset User Protection Act that prosecutors received from the Financial Supervisory Service via the fast track (emergency measure) after the law took effect in July 2024. The defendants are accused of manipulating the price by inflating trading volume and placing spoof buy orders for A Coin from July to October 2024, thereby securing illicit gains worth about 7.1 billion won. Mr. Kang was sent to trial on charges of carrying out price-manipulation orders at Mr. Lee’s direction.

Previously, prosecutors sought 10 years in prison, a fine of 23 billion won, and forfeiture of 8,015.45 million won for Mr. Lee, and six years in prison for Mr. Kang. However, on the 4th the court sentenced Mr. Lee to three years in prison, a fine of 500 million won, and forfeiture of about 846 million won, while Mr. Kang received two years in prison, suspended for three years.

A prosecution official said, “We will continue to respond strictly to unfair trading practices such as price manipulation in securities and virtual assets, and we will do our utmost to eradicate crimes that disrupt the order of the financial markets by thoroughly stripping illicit gains and principal.”

Reporter Jung Hee-won tophee@hankyung.com