Crypto-keen Korean Soldiers ‘Gave Loan Sharks Top-secret Passwords as Collateral’

Security South Korea

Passwords were level 3 military secrets, media outlets report Last updated:

September 23, 2024 23:00 EDT

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Tim Alper

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Tim Alper

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Tim Alper is a British journalist and features writer who has worked at Cryptonews.com since 2018. He has written for media outlets such as the BBC, the Guardian, and Chosun Ilbo. He has also worked…

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Last updated:

September 23, 2024 23:00 EDT

Why Trust Cryptonews With over a decade of crypto coverage, Cryptonews delivers authoritative insights you can rely on. Our veteran team of journalists and analysts combines in-depth market knowledge with hands-on testing of blockchain technologies. We maintain strict editorial standards, ensuring factual accuracy and impartial reporting on both established cryptocurrencies and emerging projects. Our longstanding presence in the industry and commitment to quality journalism make Cryptonews a trusted source in the dynamic world of digital assets. Read more about Cryptonews Several South Korean army officers may have used top-secret military passwords as collateral when borrowing money from loan sharks to buy crypto, media outlets reported on September 23.

The nation’s military Ministry of National Defence said that the unnamed captain was sentenced to a suspended prison sentence in June this year.

He was formally discharged from the military on September 19, the ministry added.

Per the South Korean newspapers Asia Today and News Geongnam, a spokesperson said that Defense Counterintelligence Command officers “became aware of the crime committed by an active-duty captain early this year.”

Loan Sharks ‘Took Passwords as Collateral’ so Soldiers ‘Could Trade Crypto’

They charged the captain in a military court in March this year, accusing him of violating the Military Secrets Protection Act.

The captain was sentenced to two years and six months in prison, although his sentence was suspended for four years.

The nation’s intelligence agency is investigating further suspicions that “active-duty officers” in a military unit in Chungcheong used passwords to secure loans to “trade or invest in crypto.”

Local police and prosecutors confirmed they had also launched an investigation. But they said they could not “disclose specific facts about the case.”

South Korean soldiers during a combat training exercise. (Source: Republic of Korea Armed Forces[CC BY-SA 2.0])Media outlets said there were allegations that “most of the soldiers involved in the incident were officers in their 20s and 30s.”

These soldiers allegedly “urgently wanted” to borrow money “for cryptocurrency trading or investment.”

The military officers were reportedly refused loans when they applied at commercial bank branches.

Media reports have claimed that the loan sharks accepted the soldiers’ offer of using the passwords as collateral.

The soldiers then appear to have used this money to buy tokens from crypto exchanges. Spokespeople did not reveal the amount of money or type of tokens involved.

“Failure to repay the debt on time would put the soldiers who borrowed the money at risk,” one media outlet explained.

Soldiers Set to Face Charges

The investigative authorities also reportedly plan to indict the group for violating the Military Secrets Protection Act.

Officers appear to believe that the loan sharks did not have any links to suspected espionage groups.

The counter-intelligence agency thinks the passwords the soldiers allegedly shared were “level 3 secrets.”

Politicians have been quick to point the finger, with the Democratic Party taking aim at President Yoon Seok-yeol and the ruling People’s Power Party.

“Military security has been compromised by private loan sharks. It’s not correct to say that there are holes in the military security network. Instead, it would be more accurate to say that automatic doors have been installed.”

Democratic Party spokesperson Hwang Jeong-ah

South Korea warned of possible military actions if North Korea continues to fly more trash balloons across the border, a rare direct threat of retaliation

— Bloomberg (@business) September 23, 2024

‘A Travesty’

Level 3 military passwords are changed daily and cannot be transmitted over phone lines or chat apps. If they are leaked, they must be destroyed immediately.

Newly enlisted soldiers are told “never to reveal [these] passwords to anyone, regardless of their rank.”

It appears that these passwords can be used to access barracks and other military facilities. Even expired passwords are thought to be highly sensitive military data.

Investigators appear confident that the loan sharks did not try to use these passwords to access any base facilities.

Three-quarters of self-employed people and small business owners in South Korea report a monthly income of less than 1 million won ($750), well below the monthly minimum wage, government data showed Sunday.

— The Korea Herald 코리아헤럴드 (@TheKoreaHerald) September 23, 2024

Cho Do-hyun, a Seoul resident, told Cryptonews.com that the revelations made him “angry.” He said:

“To undermine national security like this, for the pure pursuit of personal financial gain – it’s an absolute travesty. It’s an insult to people like me who faithfully completed our military service to serve the country.”

Earlier this month, the nation’s newest crypto investigation unit said it had seized $107 million worth of assets in its first year of operations.

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