South Korea's vibrant cryptocurrency market has been rocked by a startling revelation from financial regulators, with a joint study by the Financial Supervisory Service (FSS) and the Korea Financial Intelligence Unit (FIU) uncovering that a whopping 70% of defunct crypto exchanges failed to reimburse investors, leaving them in the lurch.

This disclosure comes as a heavy blow to over 6 million South Koreans, approximately 10% of the population, who have ventured into the cryptocurrency realm. Unlike their global counterparts, South Korean investors are known for exploring riskier, lesser-known digital assets alongside established ones like Bitcoin.

The report paints a bleak picture of industry practices, revealing that many of these closed exchanges didn't even alert users before shutting down, leaving them scrambling to recover their investments. Even in cases where notifications were issued, the withdrawal process was described as excessively cumbersome, with a minimal staff burdened by a potentially overwhelming influx of claims.

In response, the FSS is urgently working to rebuild trust in the digital asset market. They've committed to collaborating closely with other financial regulators to establish stricter protocols for closing financial firms, especially crypto exchanges. Additionally, they've issued a stern warning to CEOs of digital asset service providers, stressing the importance of complying with the forthcoming Virtual Asset Investor Protection Law, slated to take effect in July.

While the allure of substantial returns remains enticing, the hazards associated with an largely unregulated market are becoming increasingly apparent. As the FSS grapples with formulating regulatory measures, South Korean crypto investors would be prudent to exercise caution, lest they find themselves caught in the next digital upheaval.

Moreover, adding to the turmoil, South Korean authorities have recently apprehended 19 individuals linked to a fraudulent "crypto reading room" scheme that swindled over 300 investors out of $19 million. Operating on platforms like Telegram, the syndicate masqueraded as crypto experts, enticing victims with false tips and endorsements.

Utilizing counterfeit apps connected to fictitious exchanges, they lured victims with initial profits before demanding fabricated "withdrawal fees" and severing communication. The investigation also uncovered a disturbing recruitment tactic known as "pig-butchering," wherein victims were promised jobs in Myanmar but coerced into participating in the fraudulent operation upon arrival.