South Korea follows the founders of Rug Pull on Solana

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Seoul’s Southern District Prosecutor’s Office has announced that it has arrested and charged five suspects in South Korea’s first-ever case involving exchange-traded funds (DEX). The lawsuits, filed under the Virtual Asset User Protection Law that came into force in July 2024, involve charges of market manipulation and fraud, where 256 investors lost 900 million (about $600,000) after withdrawing money from the CATFI pool.

The case is the first time that South Korean authorities have applied commercial neutrality laws to a government-backed scheme, and is described as “the first prosecution of crypto crimes through the DEX.” The arrest was made on May 11, 2026, and the Prosecutor’s Office was served on May 27, 2026.

The main suspect, who goes by the name “Park,” carried out his activities online using a fake identity called “Eth Father,” an identity created to draw community attention to the CATFI code. Park and his four friends launched a meme on a decentralized platform based on the Solana network, secretly raising their wallets and the main positions of the signs before the public promotion began.

By using a circular trading strategy and coordinating wash trades in multiple wallets, the group was able to increase the price of CATFI by 1,001x in just 26 hours, attracting buyers before the entire transaction was withdrawn. Organizers made an illegal profit of 400 million won ($260,000), leaving 256 investors with empty tokens. Two were arrested and detained on charges of disrupting the market, a third was charged without detention, while two others were charged with helping the main accused to escape, and one of them is said to have spent three months in hiding to avoid arrest.

Solana News: CATFI Builds and Regulates DeFi Sector in Korea

Decentralized exchanges (DEXs) have been operating in a gray area in many areas, due to the lack of centralized listings, lack of mandatory disclosure from issuers, and anonymous wallets that have hindered compliance. Prior to the CATFI case, South Korea’s Virtual Asset User Protection Act was only used in cases of market abuse on centralized exchanges, including the hacking of the Bithumb platform and the ACE scheme. The CATFI lawsuit is the first time that unfair trade claims have been tried against a supply chain.

Prosecutors did not charge the group under the unregistered exchange or token exchange laws, instead relying on traditional fraud and market manipulation under the User Protection Act. They claimed that circular marketing, promotions using fake people, and intentionally misleading internal control of tokens are “fraudulent methods, schemes, or deceptive practices” in the sale of digital assets. The importance of this legal theory is that it means that the prosecutors do not need a registered organization or a central platform to bring cases, because the behavior that has been done on the Internet is enough to prove the case.

Officials in South Seoul were clear on the enforcement action, stressing that the office “will take action against things that disrupt the digital economy market and prevent people from trusting each other.”

The CATFI issue does not come in isolation from the broader issue, as South Korea introduced a five-minute stable requirement and kill switches for crypto platforms in early 2026, along with a new digital financial law that imposes a 100% reserve requirement for stablecoins. Officials also indicated in January that the long-term ban on Spot Bitcoin ETFs may be reconsidered. With $110 billion in crypto flows through 2025, regulators are working systematically to close the gap between DeFi operations and government oversight, putting South Korea at the forefront of countries setting the pace in prosecuting DeFi cybercrimes.

How did they find the culprits?

Researchers made a case for CATFI by using the “wallet collection” method to show the amount of tokens among the insiders, and analyzed the trading cycle to determine the connection of the phantom trade to the linked addresses. They also relied on KYC for mobile transactions, when money is transferred from anonymous wallets to fiat currencies through centralized exchanges that require authentication. These displays represent a design risk in any Rug Pull operation; Users can hide their identity on the network, but converting their earnings into cash requires going through a controlled portal.

Netizens identified the suspicious bags and filed a complaint, but authorities temporarily closed the case after the group reported it stolen. The matter was later brought to the attention of the Financial Services Commission (FSC), which led to a further criminal investigation involving the financial and tax authorities to complete a large number of references. The extension of the investigation period confirms that the Commission’s reassignment was a turning point that led to the reconstruction of forensic evidence.

Analysts feel that this case marks the end of the era of platforms with the right to maintain the law, noting that authorities are integrating online practices, social promotion, and market manipulation into traditional thinking. Pseudonyms and multiple wallet settings no longer restrict access to criminals when advanced blockchain forensics are integrated and trace their origin. South Korea’s DeFi regulations have now moved from monitoring exchanges to monitoring direct actions on the network, which meme users on Solana are now reading very carefully.

A note South Korea follows the founders of Rug Pull on Solana appeared for the first time Cryptonews Arabic.

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