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South Korea-based digital currency venture capital firm Hashed is being investigated by tax authorities. The Korean National Tax Service has reportedly launched a probe on the firm over alleged tax evasion and creating slush funds, which executives at the company have denied saying the Korean government has yet to impose taxes on digital currency gains.

According to reports by local media, the 4th Bureau of Investigation from the Seoul Regional Tax Office within the NTS has launched special tax investigations into the Seoul-based firm. The agency didn’t reveal what exactly it was looking into at the firm. Insiders at the agency told media outlets that “intense investigations on small businesses without any prior notice are not uncommonly related to slush fundraising or tax evasion on the part of the company’s CEO.”

Slush funds are pools of funds whose sources are undisclosed and raised without any specific purpose. They have been known to be used for illegal purposes, including political bribery, making them a target for regulatory crackdowns.

The investigation began in early November and the agency estimates it will conclude by February 2022. Hashed confirmed that it’s fully cooperating with the agency and has handed over all the information requested by the agency. However, it didn’t disclose what documents it had turned over.

While tax experts claim the investigation is most likely tied to tax evasion, a senior executive denied the links. Edward Hong, the head of growth at the firm, told one outlet that it’s implausible that they are being probed for tax evasion since Korea has yet to implement digital currency taxation. As CoinGeek reported, the 20% tax on digital currency gains was postponed by one more year to 2022.

Hong further clarified that while Hashed is an institution, it makes investments through proprietary funds which co-founders of the firm fully own. As such, these executives would be required to pay taxes as individuals despite raising money as a VC firm.

Hashed has recently raised $200 million for its Venture Fund II, a year after raising $120 million for its first fund. The firm has invested in several projects, including EOS, Cosmos, and MakerDAO.

Watch: CoinGeek New York presentation, Increasing Footprints of BSV Blockchain in Middle East & South Asia

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