Korean crypto exchange Bithumb at risk of closure amid fraud probe

Bithumb logo in front of suited person giving thumbs down gesture

A fraud investigation into Bithumb’s majority shareholder could make it difficult for South Korea’s second-largest crypto exchange to comply with new banking rules, reports The Korea Herald

In a statement, the exchange addressed concerns about a criminal investigation implicating 65% shareholder Lee Jung-hoon

“There are looming concerns over the company’s stable operation and whether it will pass the business registration with financial authorities due to the prosecution of fraud charges against the de facto owner,” the exchange said.

Partner with a bank, or else…

As of March 2021, the Korea Federation of Banks (KFB) gave exchanges six months to find a partner bank to satisfy anti-money laundering rules. These rules are designed to help assess risky or illegal activity by the exchange or its users.

Bithumb is in a partnership with NH Nonghyup Bank — which renews twice a year — and the new rules from the KFB could threaten the relationship.

Korean banks now have to scrutinize exchanges they partner with. They are obliged to check if there are any fraud allegations against a partner company’s executives or employees.

Bithumb attempts to distance from a dodgy ICO

In October 2018, former Bithumb Korea (Bithumb’s parent company) chairman Jung-hoon allegedly sold an unlisted crypto to investors.

  • Jung-hoon promised investors a crypto called BXA would be listed on Bithumb, but it never was.
  • Jung-hoon is no longer involved in managing the platform, according to Bithumb.
  • Bithumb’s Seoul headquarters were raided in September 2020 after the token sale raised over $25 million.

As reported by The Korea Herald, Bithumb’s statement on Friday attempted to put some distance between itself and the investigation. “Bithumb is not related to the BXA case in which a certain shareholder is involved,” said the exchange.

[Read More: 100 South Korean crypto exchanges could close in six months, report]

Many smaller exchanges have been threatened with closure because they haven’t been able to find a partner bank. And unfortunately, a sketchy de-facto owner could cause similar problems for one of South Korea’s largest exchanges. 

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