South Korea raids KLAYswap offices over Nam-kuk’s crypto scandal
According to South Korean media outlet Chosun Ilbo, the Criminal Division of the Seoul Southern District Prosecutor’s Office conducted raided the operator of the KLAYswap cryptocurrency exchange platform.
The operation took place in connection with a cryptocurrency scandal involving lawmaker Kim Nam-kuk, which include charges related to campaign finance violations, tax evasion, and the concealment of criminal proceeds.
The national assemblyman allegedly conducted numerous altcoin transactions using the KLAYswap platform. The prosecutors suspect that these transactions may have been used for money laundering purposes, leading to the arrest and search of the platform’s managers.
KLAYswap allows users to function as liquidity providers (LP) by swapping coins similar to a traditional cryptocurrency exchange. Per the report, the aim of the investigation is to gather evidence and determine the nature and implications of these transactions within the broader context of the allegations against the lawmaker.
South Korea’s Financial Intelligence Unit, the country’s watchdog of the finance and crypto sectors, detected suspicious activity in Kim’s crypto transactions and alerted local prosecutors last year. In a specific instance, Kim exchanged 510,000 Wemix coins, valued at approximately 3.6 billion Korean won (around $2.7 million), for KPS tokens in February 2022.
The recent development comes on the heels of raids and asset seizures conducted by South Korean prosecutors at the offices of Upbit and Bithumb, the two largest cryptocurrency exchanges in the country, in connection with the suspicious transactions by Kim Nam-kuk.
Nam-kuk, a member of South Korea’s National Assembly, allegedly liquidated KRW 6 billion ($4.54 million) worth of cryptocurrencies before the implementation of the Financial Action Task Force’s “Travel Rule.” He allegedly sold his digital assets without making proper disclosures to the authorities.
The travel rule, based on the recommendations of the Financial Action Task Force (FATF), requires cryptocurrency exchanges to report transactions exceeding a certain threshold to the authorities. By liquidating his assets prior to the enforcement of this rule, Kim may have sought to avoid the reporting requirements associated with the travel rule.
The lawmaker, who announced today his departure from the Democratic Party, claimed that he did not cash out his digital assets but instead transferred them to another exchange. In his defense, Kim also argued that he was not obliged to report such activity to the authorities.
“I did not borrow and receive money from anyone at all. I sold some of my stocks to use for the initial crypto investment…and I can transparently share all of the transaction records,” said Kim.