Upbit and Bithumb raided over lawmaker crypto scandal
The offices of South Korea’s biggest cryptocurrency exchanges, Upbit and Bithumb, were raided by prosecutors from the Seoul Southern District Prosecutors Office. The raid was conducted as part of an investigation into the crypto holdings of lawmaker Kim Nam-kuk, news agency Yonhap reported.
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.
Bithumb, one of the cryptocurrency exchanges involved into Kim’s investigation, has indeed faced increased scrutiny from local regulators in South Korea. The exchange has been subject to investigations and regulatory actions due to concerns related to security breaches, inadequate internal controls, and potential violations of financial regulations.
Earlier in February, South Korean prosecutors arrested Kang Jong-Hyun, the anonymous chairman and owner of Bithumb on charges of embezzlement and stock manipulation. His younger sister, Kang Ji-Yeon, and the CEO of two publicly traded Bithumb affiliates, Inbiogen and Bucket Studio, were also slapped with the same charges.
Prosecutors alleged that these executives were in breach of the duty of trust imposed on them under the law, as well as embezzlement of company funds running into millions of dollars. Under South Korea’s laws, Bithumb’s executives are staring at a lengthy prison sentence in addition to the payment of fines.
Kang and other top executives allegedly manipulated the stock price of Bithumb’s affiliate companies using convertible bonds.
