South Korean prosecutors have launched a formal investigation into Bithumb, one of the country’s largest cryptocurrency exchanges, over allegations that company funds were misused to facilitate an apartment purchase for its former CEO.
The Seoul Southern District Prosecutors’ Office executed a search and seizure operation on March 20 at Bithumb’s headquarters in Yeoksam-dong.
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 allegations that a portion of these funds was diverted for the personal acquisition of the property, prompting both the Financial Supervisory Service (FSS) and prosecutors to investigate the matter.
The FSS initially reviewed the case before it was handed over to the prosecution for further legal action.
Allegations, Investigations, and Bithumb’s Response
According to reports, the former CEO secured a loan from a third-party lender immediately following the FSS investigation and repaid the amount in full.
However, prosecutors continue to probe whether corporate funds were used inappropriately and whether legal violations occurred.
Local media outlet YTN first reported on the case, citing anonymous sources within the regulatory agencies.
Meanwhile, additional concerns have surfaced regarding the integrity of Bithumb’s token listing process.
Wu Blockchain reported that projects seeking listings on Bithumb and rival exchange Upbit allegedly paid intermediary fees.
Source: Wu Blockchain News / TG
Two projects purportedly paid $2 million and $10 million, respectively, for their listings, while some intermediary fees ranged from 3% to 5% of the total token supply.
These revelations have fueled speculation that market manipulation and improper financial incentives could be at play.
Bithumb has yet to release a formal statement regarding these additional allegations, but the exchange has previously emphasized its commitment to compliance and financial transparency.
However, past legal issues, including tax probes and fraud investigations, have weighed on the company’s regulatory standing in South Korea.
Bithumb’s IPO Aspirations and Legal Challenges
The timing of this investigation is particularly sensitive, as Bithumb is actively working towards a long-anticipated initial public offering (IPO).
On March 18, Business Post reported that Bithumb CEO Lee Jae-won is accelerating the IPO process by implementing corporate restructuring measures to mitigate judicial risks for major shareholders.
Source: Business Wire – Bithumb CEO, Back Young Heo
The exchange has been preparing for its stock market debut since 2020, but previous legal troubles have repeatedly delayed the listing.
In 2021, Bithumb’s former board chairman, Lee Jeong-hoon, was indicted on fraud charges, though South Korea’s Supreme Court later acquitted him.
This recent legal victory was expected to clear the path for Bithumb’s IPO, which is now projected for 2025.
The company selected an underwriter in 2023, and 2024, it established a non-exchange business unit to streamline operations ahead of its Nasdaq listing.
The current investigation could add another layer of uncertainty to its IPO ambitions, potentially impacting investor confidence.
Bithumb’s legal troubles are part of a broader trend of increased regulatory scrutiny on South Korea’s cryptocurrency sector.
The Trajectory of South Korea’s Crypto Industry
Over the years, the exchange has been implicated in multiple scandals, including tax evasion probes, price manipulation investigations, and allegations of fraudulent activities.
Since 2018, South Korean authorities have raided Bithumb’s offices multiple times concerning various cases, though no definitive conclusions have been reached in several instances.
The latest raid follows renewed government efforts to implement stricter crypto regulations, especially concerning 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, this policy has faced delays due to political opposition.
As it stands now, If Bithumb is found guilty of financial misconduct, the exchange could face severe penalties, potentially impacting the broader crypto market in South Korea.
Conversely, if the allegations are proven baseless, Bithumb may regain some regulatory goodwill and continue its push for a successful IPO.
For now, the exchange remains under intense scrutiny, and the crypto community awaits further developments from the ongoing investigation.
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