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Bithumb headquarters raided by local South Korean authorities

Photo of: Janeth Diamond
by Janeth Diamond

Crypto exchanges in South Korea are constantly under the microscope, with regulators looking to ensure robust compliance with existing financial guidelines. Earlier in the year, the country’s legislature passed a landmark bill that legalized crypto trading. Part of the requirements in the bill was the enforcement of real-name cryptocurrency trading accounts to prevent fraud. 

Recently it was Bithumb to be standing in the line of fire in South Korea, which reportedly has been raided by the local authorities. The raid apparently suggested allegations of fraudulent activities by the noted exchange. According to the local news source, the Intelligent Crime investigation unit of the Seoul Police division has raided the largest cryptocurrency exchange Bithumb. The crime investigation authorities have apparently raided the headquarters of the exchange yesterday. As per the reports, Bithumb had conducted a presale of its native token BXA to investors to the tune of 30 billion won which equates to $25.2 million. The token was to be listed on the exchange, but the exchange’s failure to do so caused mountains of losses to its investors who participated in the presale. As a result, the law enforcement wing did not lose a wink before swooping in the headquarters making its way to search and confiscate documents leading them to this event. The Chairman of the exchange Lee Jung-Hoo is also under the scanner for the faux pas.

Back in November last year, senior executives of the Coinup cryptocurrency exchange had been impeached on fraudulent charges with the CEO bagging a 16-year jail term. The principal agents were accused of running a well-orchestrated crypto scam to the tune of $386 million. The fraudulent activities also involve deceiving users with some non-existent investment schemes that promised fake returns of more than 200% in less than 2 months. Such a tough regulatory environment in the country has led to a significant decline in trading volume in 2019. Many important platforms which were registered back then, came on the brink of bankruptcy. Even the homebred local blockchain projects witnessing such a strict regime on home grounds shifted to foreign soil to list their tokens on overseas exchanges.

South Korean’s scanner is set to be tightening its grip on the crypto sector because it will soon be pushing its bid to regularize its cryptocurrency tax regime. In June this year, the finance minister emphasized that the gains falling under the crypto category should come under the tax net.

South Korea has a thing for stern regulations. With the financial sector always under its stringent and rigorous microscope of due diligence, the regulators have been very serious about its financial guidelines and compliance with it. The same applies to the cryptocurrency industry especially the crypto exchanges present here. 

Although some form of regulations is necessary but the necessary authorities should realize that exercising control in an over-compulsive manner will have a tendency to drive away not just the local companies but also will hinder the entry of new players fearing such critical moves.