Two South Korean lawmakers have called for a comprehensive investigation into the collapse of the KOK token, which has left an estimated 1.86 million investors worldwide with losses totaling $3 billion. During a National Assembly audit held in Seoul on Monday, lawmakers Yang Moon-suk and Min Hyung-bae pressed financial regulators and law enforcement to uncover the full extent of the alleged fraud.
The KOK Token Collapse and Multi-Level Marketing
The KOK token once traded at $7 on international exchanges but plummeted to near zero after its promoters ran a multi-level marketing scheme that promised monthly returns between 4% and 20%. According to South Korean media, the scheme primarily targeted middle-aged workers and retirees, who were lured by the promise of passive income through hierarchical recruitment. However, the unsustainable model eventually collapsed, leaving victims with worthless tokens.
Victims' lawyer Min-suk Lee revealed that a fugitive ringleader currently on bail in the United States allegedly used investor funds for gambling. Lead victim Jin Eun-ja testified that the suspect had transferred millions of dollars through crypto accounts even while under court supervision. The case has raised concerns over the lack of cross-border cooperation in freezing and recovering illicit assets.
Lawmakers Demand Action
Lawmaker Yang Moon-suk emphasized that the KOK case exemplifies the dangers of unregulated token offerings and urged the government to finalize detailed regulations under the upcoming Virtual Asset User Protection Act. Lawmaker Min Hyung-bae criticized the financial watchdog for failing to detect the fraudulent scheme earlier, noting that similar pyramid schemes had been reported in the past. Both lawmakers insisted that prosecutors and police work with international agencies to extradite the fugitive and recover funds.
The Financial Supervisory Service has frozen some domestic accounts linked to KOK, but a significant portion of the proceeds has already been moved overseas, complicating recovery. The lawmakers called on Interpol to issue a red notice for the fugitive reported to be residing in the U.S.
Victims Accuse Chosun Ilbo of Promoting the Scam
A coalition of victims has accused Korea's largest newspaper, Chosun Ilbo, of playing a central role in legitimizing the KOK token. Evidence submitted during the audit shows that the newspaper published multiple favorable articles and advertisements for KOK between 2018 and 2020, including awarding it “Best Blockchain Project” in an annual competition. Attorney Lee argued that the timing of these promotions coincided with price manipulation efforts and that the newspaper must have known about the token's dubious nature.
Victims demanded a formal apology from Chosun Ilbo and the removal of all KOK-related content from its archives. Some have also called for compensation funds to be set up using the newspaper's advertising revenue. Chosun Ilbo responded by stating that its coverage was based on information available at the time and that it could not have foreseen the fraud. However, critics argue that the lack of due diligence by major media outlets has become a systemic issue in South Korea's crypto boom, where profit-driven endorsements mislead the public.
Broader Implications for Crypto Regulation
The KOK scandal has intensified calls for stricter oversight of crypto assets in South Korea. While the country implemented anti-money laundering rules for exchanges in 2021, token issuers and promoters remain largely unregulated. Data shows that crypto fraud cases in South Korea exceeded $1 billion in 2023, with approximately 2 million victims. The KOK case is the largest single incident to date.
Lawmakers are now pushing for the passage of the Virtual Asset User Protection Act, which would classify crypto-related fraud as a serious economic crime and allow for enhanced penalties, including asset forfeiture and longer prison terms. The outcome of the KOK investigation is expected to serve as a catalyst for this legislation. Meanwhile, the victims' legal team is preparing a class-action lawsuit against the project team, promoters, and allegedly complicit media outlets, seeking restitution for the massive losses incurred.