Under investigation

Ex-Bithumb chief linked to alleged ICO fraud handed over to South Korea prosecutors

The former chairman of one of South Korea’s largest digital currency exchanges has been turned over to the country’s prosecutor’s office. Lee Jung-hoon, the former chair of Bithumb Korea, is under investigation for fraud. The involvement by the prosecutor’s office proves that the investigation into the alleged fraud in Bithumb may be heating up.

Bithumb, which is the second-largest exchange in South Korea after Upbit, has been under investigation for fraud in connection with a 2018 token sale. The exchange conducted the Blockchain Exchange Alliance (BXA) token sale and raised $25 million, according to reports. In addition to the alleged ICO fraud, Lee is also under investigation for alleged fraud, tax evasion and transferring assets out of South Korea irregularly.

Seoul Metropolitan police called in Lee in September for questioning. Little has been revealed of the progress of the investigation, until now. According to a report by one outlet, the Seoul police have handed the former Bithumb Korea executive over to the Supreme Prosecutor’s office. The office works with the Supreme Court of Korea and has the power to independently conduct investigations, call in related parties for questioning and even seize property.

The BXA token ICO has continued to haunt the exchange and its executives, three years later. Prior to the ICO, Bithumb told investors that the token would list on the exchange once a Singaporean investment company acquired Bithumb, leading investors to put in KRW30 billion (US$25.7 million) into the project. However, the acquisition deal fell through and Bithumb never listed the BXA token.

Without the listing, the BXA token was basically worthless. Consequently, the token’s price plunged, losing investors millions of dollars. Lee was identified as one of the architects of the BXA ICO and the authorities have been investigating him since. Initially, the police were investigating him for the tax evasion and transfer of property abroad as well, but according to the recent report, they have decided not to pursue these charges.

South Korea has continued to be a leader in blockchain and digital currency regulations. The latest report claims that top politicians in the country are pushing for regulation of the industry, as opposed to a hardline stance.

See also: CoinGeek Live panel, Digital Currency & Global Compliance: Tools & Tips for Exchanges, Wallets & Other Service Providers

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