In a recent setback for South Korean prosecutors, 14 suspects have been cleared of all charges related to the alleged illicit remittance of $3.2 billion worth of assets, including cryptocurrencies, fiat currencies, and goods. While officials had accused 16 individuals of wrongdoing, the Seoul Central District Court acquitted the majority of the accused, including one individual suspected of masterminding the operation. In this article, we will delve into the details of the case, the phenomenon of kimchi premium trading, and the legal complexities surrounding these activities.
The kimchi premium refers to the phenomenon where cryptocurrencies, particularly Bitcoin (BTC) and altcoins, are traded at significantly higher prices on South Korean exchanges compared to international platforms. This trend often occurs when there is a surge in demand within the South Korean retail investment market. Opportunistic traders have attempted to exploit this market inefficiency by purchasing coins from foreign OTC vendors and subsequently selling them on domestic platforms, profiting from the price disparity.
During the 2017 bull run, the kimchi premium reached a peak of around 55% before settling around the 20% mark during the 2020-2021 bull run. While this practice may be viewed as unethical by some, the legal community in South Korea remains divided on whether it constitutes a violation of national law. Despite the ambiguity, South Korean prosecutors have been determined to crack down on crypto traders they suspect of manipulating exchange prices, with an estimated total gain of around $6.5 billion.
In the case at hand, prosecutors claimed that the accused group engaged in kimchi premium trading amounting to over $3 billion from April 2021 to August 2022. They alleged that the group utilized a network of shell companies and falsified trade payments to obfuscate their activities. However, the Seoul Central District Court ruled that the prosecution failed to provide irrefutable evidence of wrongdoing by the accused individuals.
The court’s decision was largely based on the fact that the prosecutors relied heavily on Supreme Court precedent rulings rather than concrete acts of law. The presiding judge highlighted that the previous rulings primarily focused on determining the guilt of individuals and their own misconduct, rather than specifically addressing the complex issue of kimchi premium trading. This discrepancy in legal interpretation posed a challenge for the prosecution’s case.
Unsatisfied with the court’s ruling, the prosecution has already submitted an appeal request. They believe that the High Court will provide a more favorable verdict in their pursuit of holding the accused accountable for their alleged involvement in the kimchi premium trading scheme. Despite the setback, the prosecutors remain confident in their case and are determined to secure a conviction that sets a precedent for future similar cases.
The controversy surrounding kimchi premium trading underscores the legal complexities surrounding cryptocurrency activities in South Korea. While some argue that such trading violates national law, others contend that it falls within a legal gray area due to the lack of specific regulations addressing it. The South Korean government has recognized the need for clearer guidelines and plans to introduce new crypto-related laws effective from July 19, with stricter penalties for crypto market manipulation-related offenses.
The recent acquittal of 14 suspects in the kimchi premium trading case dealt a blow to South Korean prosecutors’ efforts to shut down alleged illicit activities. With the battle now moving to the High Court, the outcome remains uncertain. The phenomenon of the kimchi premium trading continues to present challenges for regulators, and the introduction of new crypto-related laws aims to address these complexities. As the legal landscape evolves, the question of whether kimchi premium trading violates national law or not remains a contentious issue that requires further clarity.