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Ahmed Barakat
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Solana News: The Seoul Southern District Prosecutor’s Office has arrested and prosecuted five suspects in what is the first case in South Korea related to a human exchange scheme.
The case, which came under the Virtual Asset User Protection Act, which came into force in July 2024, is about market manipulation and fraud, where 256 investors lost 900 million ($600,000) after funds were withdrawn from the CATFI pool.
The case is the first time that South Korean authorities have applied the Act’s provisions on unfair trading to a DEX-based scheme, clearly labeling it as “the first prosecution of crypto crimes committed through DEX.”
The suspects were arrested on May 11, 2026; all five were indicted by the Seoul Southern District Prosecutors Office on May 27, 2026.
The main suspect, who goes by the name Park, operated online as “Eth Father”, a fake persona created to create public interest in CATFI.
Park and four of his friends started meme money at a Solana-based exchange, quietly raising the bags with the big logo before the crowdfunding campaign began.
Using round trading and wash trading in multiple wallets, the group pumped CATFI’s price 1,001 times within 26 hours, attracting retail buyers before withdrawing all funds.
The organizers made nearly ¥400 million ($260,000) in illegal profits, leaving 256 investors with empty positions.
Two suspects were arrested and charged with disrupting the market; one was prosecuted without imprisonment; two others were charged with helping the suspect evade government officials – one of whom is said to have spent three months in hiding to avoid arrest.
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Solana News: South Korea CATFI Built by DeFi Regulation
DEXs have been overly active in many areas, with no central tracking system, no disclosure of issuers, and fraudulent wallet tools that have been frustrating in the past.
Prior to CATFI, South Korea’s Virtual Asset User Protection Act was used in a number of central exchange and stock market cases, including fraud on Bithumb and the ACE token scheme. CATFI’s lawsuit is the first time that unfair trade claims have been brought against chain DEX operations.
Prosecutors did not charge the group with the exchange of unregistered individuals or trademark laws. Instead, they relied on the traditional fraud and market manipulation provisions contained in the User Protection Act, saying that circular marketing, false promotions, and the deliberate misrepresentation of internal controls are “fraudulent schemes, plans, or techniques” in the sale of digital goods.
The legal concept is important: it means that prosecutors do not need a registered organization or a central platform to bring cases – doing it on the chain is enough.
Prosecutors in the Seoul Southern District made the law clear, saying the office would “do things that disrupt the market for digital products and prevent people from trusting each other.”
The CATFI case is not isolated. South Korea introduced a five-minute settlement requirement and reformed its crypto-system by early 2026, along with a new Digital Asset Act that has 100% reserve for stablecoins.
Officials also announced in January a review of the country’s long-standing ban on bitcoin ETFs.
Against the backdrop of $110 billion in crypto output in 2025, regulators have been systematically closing the gap between DeFi services and regulatory oversight, and to a greater extent. crypto regulatory systems are changing around the worldSouth Korea’s enforcement stance is increasing the pace of DeFi-specific cybercrime.
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How Did They Follow Them?
Researchers have created a CATFI wallet using a wallet to create internal flows, analysis of circular flows to identify business connections and linked addresses, and a KYC interface, where anonymous wallets are converted to fiat at a central exchange with authentication requirements.
The transparency of the process is an inherent risk in any DEX-based system: users can hide their information on-chain, but converting money to fiat requires going through a controlled gateway.
Online investigators identified the suspicious bags and filed a complaint, but authorities temporarily closed the case after the group reported it stolen.
The Financial Services Commission later reviewed the matter, which led to a new legal investigation that brought together financial and tax authorities to complete extensive evidence. Additional information during the search proving that the FSC’s redeployment was a turning point that opened the door to a complete overhaul of the legal system.
Analysts point out that the issue marks the end of DEXs as a blind spot, noting that authorities are mapping traffic, crowdfunding, and market disruption into popular legal concepts. Unidentified wallet placement and multi-wallet placement does not pose a crime that cannot be reached when combined with modern blockchain technology and KYC checks on the way.
DeFi regulations in South Korea have now shifted from monitoring exchanges to chain systems, and users of the Solana meme coin who think that fragmentation means insecurity are reading this word very carefully right now.
