Court recognizes bitcoin as assets gov’t can seize

For the first time in Korea, bitcoin has been recognized as property that authorities can seize in criminal cases.

The Korean Supreme Court on Wednesday upheld a ruling by a lower court that allowed the government to confiscate bitcoin that a 34 year-old man surnamed Ahn earned through an illegal business on the grounds that the cryptocurrency has value as his property.

The ruling will likely allow the government to confiscate cryptocurrencies used for payments in other illegal transactions, such as those involving drugs, gambling and pornography.

Ahn was sentenced to 18 months in jail and was fined 695.8 million won ($644,380) by the Supreme Court in addition to the lower court’s decision that confiscated 191 bitcoin tokens currently worth $1.4 million that he earned through an illegal pornography website. The 34-year-old is in violation of manufacturing and distributing adult content.

Ahn ran the porn website AVsnoop.club between December 2013 and early last year. During that time, the site attracted 1.22 million members and made 1.9 billion won in profit.

The prosecutors in the first trial wanted to confiscate 1.4 billion won that was not just in his own account, but also the accounts of his family members, as well as 216 bitcoin tokens, which was the total amount that members of his website paid. At the time of his arrest on April 17, the 216 bitcoin tokens were valued at roughly 500 million won. However, by January of this year, when Ahn’s case went up to an appeals court, their value surged up to roughly 2.5 billion won.

The judge in the first trial sentenced Ahn to 18 months with a 340 million won fine, but denied confiscation of the 216 tokens, arguing that since bitcoin, unlike cash, has no physical form and only exists as a digitalized file, confiscating it wouldn’t be appropriate.

The 340 million won fine was based on advertisement profits and payments from members of the site.

However, when the case went to the appeals court, the judge concluded that despite bitcoin having no physical form, the tokens Ahn collected were profit, as they were the result of a transaction through an exchange market and were used to purchase goods and services. Therefore, the government has the right to confiscate it, the judge concluded.

He said that allowing the defendant to keep the bitcoin would be the same as allowing the defendant to possess monetary profit gained from managing a pornographic website.

The court only acknowledged 191 bitcoin tokens as profit made from criminal acts.

Using bitcoin to pay for crimes has been growing in recent years, especially as transactions on the dark web have become more widespread.

The most recent such case was earlier this month, when Seoul police arrested and indicted three people who sold 120 million won worth of marijuana that was grown at an officetel (dual-purpose buildings used for commercial and residential purposes) in Goyang, Gyeonggi, from November last year. The payments were made in cryptocurrency to avoid authorities tracking it, according to police.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]