Last week South Korea has been in the limelight announcing its considerations of implementing heavy handed restrictions which arguably contributed to the crypto crash wiping hundreds of billions of dollars into thin air. Soon after, and on a much less public platform, there was an investigation as to whether officials who had this insider knowledge prior to the announcement had performed ‘insider’ trading to hedge themselves from the imminent losses.
Insider trading is highly illegal in normal trading circles and most would say unethical. It is when an individual who works for a specific organization that is involved heavily in an industry performs trading for profits based upon the information they have which is not available to the public. In the case of the South Korean officials, they were reported to have sold off their cryptocurrencies prior to the announcement to minimize their losses and even gain more profits should they buy in again at the lowest point of the dip.
In a meeting reported by Joongang Ilbo, a right-wing party lawmaker was quoted:
“There is intelligence that FSS staff sold virtual currency that they invested in just prior to the announcement of the government’s measures.”
This was later confirmed by FSS Governor Choi Heung-sik. The lawmakers have called for “thorough investigation and punishment” as they emphasized the gravity of these actions.
This ‘punishment’ is not as simple as it sounds. The Korean Public Service Ethics Act applies specifically to stock trading. Chosun stated that the act “strictly restricts the stock trading of public officials in order to prevent the misuse of internal information.” The complication is that cryptocurrencies are not defined as a financial asset or currency. As a result, the act cannot be directly applied without interpretation.
Since then the FSS has announced that it has created a Virtual Currency Task Force. This is broken into two divisions: a virtual currency checkpoint and virtual currency counterpart. This task force was supposedly created in early December, being the second to have been created by the Government. It appears that this taskforce needs and will continue to be adapted to the ever-changing crypto landscape.
There are also calls for FSS staff to cease virtual currency trading. This is a little bit ironic as the crypto world runs 24/7 and is anonymous, as such there is no way of confirming how effective these regulations will be.
The cryptoworld is often referred to as the wild west where anything goes, apparently, this also includes inside trading.
Joshua has been investing and trading in fiat currencies for a since 2013. he has recently moved into the crypto world spreading his portfolio over long term coin investments, ICOs and day trading