South Korean prosecutors have indicted five individuals in the country’s first-ever criminal prosecution of a decentralized exchange rug pull — and the first case in which fraudulent trading charges under South Korea’s Virtual Asset User Protection Act have been applied, setting a landmark legal precedent for how the country’s crypto enforcement framework handles DEX-based market manipulation on Solana and other blockchains.
The Seoul Southern District Prosecutors’ Office Virtual Asset Crime Joint Investigation Unit announced on May 27 that it had arrested and indicted two suspects on market manipulation charges, indicted a third without arrest, and separately indicted two additional suspects for obstructing justice by helping the ringleader evade capture — five defendants in total across two separate charging tracks, per Digital Asset’s May 27 reporting of the prosecutor’s statement.
SOL's price moving sideways on the daily chart. Source: SOLUSD on Tradingview
How The Solana Scheme Worked
The operation centered on CATFI — a Solana-based meme coin launched on pump.fun, the widely used Solana token issuance platform that gained significant traction during the early 2025 meme coin frenzy. The group spent several million Korean won to launch the token and list it on a decentralized exchange, per the prosecution’s account.
The ringleader, identified only by his surname Park, operated under the influencer alias “EtherFather” on social media — presenting himself as an independent third party with no financial interest in the project while actively recommending CATFI purchases to his followers. Simultaneously, the group operated the project’s official social media accounts, artificially inflating follower counts and publishing false promotional announcements to drive retail buying interest, per the prosecutor’s statement as reported by Digital Asset.
To conceal their control over the token’s supply, the group distributed holdings across multiple wallets and conducted circular trading — a technique designed to create the appearance of organic market activity while masking the fact that the issuing parties controlled the token’s liquidity. Once retail investors had entered, the group executed the rug pull — abandoning the project and exiting with approximately 400 million Korean won in illicit proceeds from an initial outlay of roughly 10 million won, per the filing.
The Scale Of The Damage
CATFI’s price surged 1,001 times in the 26 hours following its launch, attracting approximately 6,000 investors. Of those, 256 suffered confirmed financial losses totaling approximately 900 million Korean won — roughly $650,000 at current exchange rates — per the prosecution’s figures cited in the Digital Asset report.
Why The Precedent Matters
Two firsts define this case’s significance. It is the first prosecution under the Virtual Asset User Protection Act using fraudulent trading charges — specifically the act’s prohibition on “use of fraudulent means, plans, or schemes” and “false statements on material matters” in connection with digital asset transactions, per the prosecution’s legal framing.
The prior landmark case under the same law applied market manipulation charges relating to centralized exchange activity. This case extends that framework to decentralized exchange transactions for the first time — a meaningful expansion of regulatory reach into a space prosecutors have historically struggled to address.
This development marks a critical juncture for the nascent sector’s regulatory trajectory in South Korea. A successful rug pull prosecution targeting DEX activity on Solana, influencer-driven manipulation, and coordinated wallet obfuscation simultaneously signals that Korean enforcement agencies are developing both the technical capability and the legal framework to pursue crypto fraud beyond the centralized exchange perimeter.
Cover image from Grok, SOLUSD chart from Tradingview
