South Korean prosecutors have officially launched an investigation into Bithumb, a major cryptocurrency exchange in the country, amid allegations that company funds were misused to facilitate an apartment purchase for its former CEO. The Seoul Southern District Prosecutors’ Office conducted a search and seizure operation at Bithumb’s headquarters in Yeoksam-dong on March 20.
Authorities suspect that Bithumb provided a 3 billion Korean won (approximately $2.4 million) lease deposit for an apartment in Seongsu-dong to its former CEO and current advisor, Kim Dae-sik. There are concerns that some of these funds may have been diverted for personal use, prompting both the Financial Supervisory Service (FSS) and prosecutors to launch an investigation. The FSS initially reviewed the case before handing it over to the prosecution for further legal action.
Reports indicate that the former CEO secured a loan from a third-party lender following the FSS investigation and repaid the amount in full. However, prosecutors are continuing to investigate whether corporate funds were used inappropriately and if any legal violations occurred. Local media outlet YTN first reported on the case, citing sources within regulatory agencies.
In addition to the allegations of funds misuse, there are concerns about the integrity of Bithumb’s token listing process. According to Wu Blockchain, projects seeking listings on Bithumb and rival exchange Upbit allegedly paid intermediary fees, with some fees ranging from 3% to 5% of the total token supply. These revelations have raised suspicions of market manipulation and improper financial incentives.
While Bithumb has not issued a formal statement regarding these additional allegations, the exchange has previously emphasized its commitment to compliance and financial transparency. However, past legal issues, including tax probes and fraud investigations, have affected the company’s regulatory standing in South Korea.
The timing of this investigation is crucial as Bithumb has been working towards an initial public offering (IPO). The exchange’s CEO, Lee Jae-won, has been expediting the IPO process by implementing corporate restructuring measures to mitigate judicial risks for major shareholders. Previous legal troubles, including the indictment of Bithumb’s former board chairman, have delayed the listing in the past.
Despite these challenges, Bithumb’s IPO is projected for 2025, with the company making significant strides towards its stock market debut. However, the current investigation could introduce further uncertainty and impact investor confidence in the exchange.
Bithumb’s legal issues are part of a broader trend of increased regulatory scrutiny on South Korea’s cryptocurrency sector. The exchange has been embroiled in multiple scandals over the years, including tax evasion probes and price manipulation investigations. The latest raid follows the government’s efforts to implement stricter crypto regulations to enhance institutional compliance and investor protections.
South Korea has been refining its cryptocurrency regulatory framework, including proposals to impose a 20% tax on crypto gains. However, political opposition has caused delays in implementing this policy. If Bithumb is found guilty of financial misconduct, it could face severe penalties, potentially affecting the broader crypto market in South Korea. Conversely, if the allegations are proven baseless, Bithumb may regain regulatory goodwill and continue its path towards a successful IPO.
As the investigation unfolds, the crypto community eagerly awaits further developments in this ongoing case. Stay tuned for updates on the outcome of the probe into Bithumb’s alleged funds misuse and its impact on the cryptocurrency exchange landscape in South Korea.