South Korean police have apprehended Bithumb owner Kang Jong-hyun on suspicion of embezzlement and breaching relevant sections of the country’s capital market laws.
Media outlet JTBC News reported the arrest of the exchange’s executive on Thursday, days after investigators applied for an arrest warrant. The Seoul Southern District Court issued the warrant for Kang’s arrest after satisfying itself that the executive had a case to answer.
Investigators allege that Kang misappropriated over KRW60 billion (US$49.03 million) from Bithumb while sanctioning several illegal transactions in contravention of the Capital Markets Act. It is also suspected that Kang raked in unfair profits from stock price manipulation in Bithumb’s affiliates and issuing convertible bonds.
Investigators secured the arrest of two other persons alleged to have been running the accounts of the embattled owners.
However, Kang denied the allegations, saying it was impossible for him to manipulate stock prices as he did not hold any stake in Bithumb’s affiliated entities. Kang’s younger brother and CEO of Bucket Studio, a Bithumb affiliate, Kang Ji-yeon, revealed in a notice that the claims against his brother are “unconfirmed.”
While Kang Ji-yeon confirmed his readiness to cooperate with investigators, prosecutors are scrutinizing his activities for any signs of a collaboration between the duo.
In early January, the National Tax Service (NTS) opened a special investigation into the exchange on the grounds of tax evasion. A similar probe in 2018 led to Bithumb paying a hefty lump sum to the NTS, and so far, history might repeat itself.
The crusade against bad actors
South Korean prosecutors have adopted an active approach to controlling the local virtual currency industry, leaving a trail of raids and arrests along the way. The crusade against erring entities in the industry has shown no signs of slowing down in 2023, and instead, regulators are upping the ante.
The latest move by regulators is the Ministry of Justice’s plan to set up a virtual currency tracking system to allow law enforcement to follow the movements of stolen digital assets. The Ministry’s plan will be accompanied by the launch of an independent analysis system to be released before the end of 2022.
Meanwhile, the country’s Financial Supervisory Service (FSS) has hinted at the possible establishment of a digital asset disclosure system to assist enforcement agencies in clamping down on virtual currency crime.
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