Regulators globally continue to tighten their oversight over the digital asset industry, with authorities in South Korea proposing screening executives before they get hired at virtual asset service providers (VASPs) as Hong Kong targets over-the-counter (OTC) trading venues.
In the U.S., the Securities and Exchange Commission (SEC) has settled with an alleged ‘crypto’ scam that took off with $1.2 million in investor funds while claiming to use artificial intelligence (AI) to generate returns.
South Korea to screen VASP execs
South Korea has been progressively bringing the digital asset sector under oversight. While most efforts have catered to the companies and their systems, the Financial Services Commission (FSC) now focuses on the people behind these entities.
On Monday, the FSC unveiled a new proposal in its VASP reporting requirements that gives it authority to vet prospective employees before they take over their roles. Under this new proposal, VASPs must report any personnel change to the watchdog, and new hires can’t take over until the FSC clears them.
According to local reports, the proposal will likely sail through and take effect within the next two months. However, it must first undergo a review by the Ministry of Government Legislation and a vote by the FSC. The public has until March 4 to submit feedback.
The new rule also extends the reach of the FSC’s authority in licensing digital asset firms. The watchdog can now suspend a VASP license if it discovers that any of its executives are under investigation in other jurisdictions. Personnel changes without the regulator’s consent could also cost a firm its license.
Additionally, under the proposed regime, individuals convicted of a crime can’t hold a VASP executive role until five years after the execution of the sentence.
As South Korea works on bringing digital assets under its regulatory purview, Montenegrin police announced on Monday that they had deported Do Kwon’s business partner to the country, 10 months after his arrest.
The police only identified him by his initials, stating, “J.C.H. was handed over to the competent judicial and police authorities in South Korea today in order to conduct criminal proceedings for more criminal offences related to financial investment fraud services.”
Elsewhere in Asia, Hong Kong is targeting OTC trading platforms, which it says have been facilitating crime. The Financial Services and the Treasury Bureau (FSTB) says their ready availability has made them easy targets for criminals.
“In fact, OTC venues have played a certain role in some of the fraud cases involving some unlicensed VA trading platforms last year, having misled investors to channel funds to these unlicensed platforms,” FSTB’s Christopher Hui said in a recent blog post.
“Therefore, we believe that it is necessary to bring OTC venues under regulation, and we will launch a consultation very soon on the proposed regulatory framework,” he added.
American Bitcoin Academy faces fraud charges in US
In the U.S., the SEC has settled with the American Bitcoin Academy in connection with charges that Brian Sewell defrauded $1.2 million out of 15 students of his online digital asset trading course.
Since at least 2018, Sewell lured the victims to invest in the Rockwell Fund, which he claimed would employ complex technology like AI to generate high returns, according to the regulator.
Sewell never launched the fund, instead purchasing BTC with the investors’ money, SEC said. However, he lost all the money when his BTC wallet was hacked and wiped clean.
Through his company, Sewell agreed to pay disgorgement and prejudgment interest amounting to $1.6 million while paying a $233,229 civil penalty in a personal capacity.
“Whether it’s AI, crypto, DeFi, or some other buzzword, the SEC will continue to hold accountable those who claim to use attention-grabbing technologies to attract and defraud investors,” commented Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
Watch Jerry Chan: If Bitcoin is not an effective medium of exchange, it cannot be a store of value
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