South Korean prosecutors just made history. Five suspects have been indicted under the Virtual Asset User Protection Act for defrauding 256 investors of approximately $600,000 through a Solana-based memecoin called CATFI.
This is the first criminal case targeting a DEX rug pull in South Korea — and it changes everything.
How the Scheme Worked
Phase 1: Pre-Loading
The ringleader, known as "Eth Father", and associates loaded wallets with CATFI tokens BEFORE any public trading began.
Phase 2: Wash Trading
Circular buys and sells between their own wallets to fake trading volume and create artificial price movement.
Phase 3: Price Manipulation
Within 26 hours of launch, CATFI price surged 1,001x through coordinated wash trades. The market cap hit $8.99M.
Phase 4: Rug Pull
Once retail investors FOMO'd in, the team pulled all liquidity from the DEX pool. Token price crashed 99%. Suspects walked away with ~$260,000.
Phase 5: Cash-Out — And This Is Where They Got Caught
Crypto profits → CEX conversion → Korean won → KYC revealed identity
The pseudonymous wallets didn't matter. When suspects tried to convert crypto to fiat through regulated Korean exchanges with mandatory KYC, the anonymity wall cracked.
Why This Case Is a Landmark
| Element | Before CATFI | CATFI Precedent |
|---|---|---|
| Exchange | Centralized CEX only | DEX included |
| Operator | Identifiable entity | Pseudonymous |
| Evidence | Server records | On-chain data |
| Outcome | Gray zone | Indictment secured |
The Virtual Asset User Protection Act's unfair-trading provisions now officially apply to DEX-based operations. DeFi is no longer a regulatory sanctuary.
The FSC Intervention
Investigators almost dropped the case after suspects claimed they'd been "hacked" — a common excuse in crypto fraud. The Financial Services Commission intervened, re-referred the matter for prosecution, coordinated with financial and tax authorities, and ultimately secured the indictment.
Red Flags Investors Missed
| Signal | Why It Matters |
|---|---|
| 1,001x price increase in 26 hours | Physically impossible without manipulation |
| "Eth Father" persona | Classic pump-and-dump playbook |
| Unknown team | Zero accountability |
| Solana memecoin | Highest rug pull risk category |
| No audit, no whitepaper | Zero transparency |
On-Chain Forensics That Cracked the Case
- Wallet clustering: Mapped connected addresses to suspects
- Trading pattern analysis: Identified wash trades through circular transaction flows
- CEX conversion tracing: Tracked crypto-to-fiat conversions through KYC'd exchanges
- Social media correlation: Linked promotion timing to trading patterns
What This Means for Crypto
The CATFI prosecution proves:
- DEX rug pulls ARE prosecutable under existing law
- Pseudonymous ≠ anonymous when cash-out requires KYC
- On-chain forensics can provide court-admissible evidence
- Regulatory coordination (FSC + prosecutors + tax) works
- DeFi is no longer a regulatory free zone
The days of anonymous DEX rug pulls with zero consequences may be numbered.
Sources: The Currency Analytics, Cointelegraph
More investigations at On-Chain Investigations
