Bithumb Ex-Chair Faces 8 Years in Prison for Alleged $70M Crypto Fraud: Report

South Korean prosecutors are pushing for an eight-year sentence for Lee Jung-hoon, the former chairman of crypto exchange platform Bithumb, for an alleged $70 million fraud.

According to a report by the local media outlet Yonhap, prosecutors alleged that Lee had defrauded Kim Byung Gun, the chairman of Singapore-based BK Group, in a failed attempt to acquire Bithumb earlier in 2018.

The Genesis

As per the report, Lee convinced Kim to issue Bithumb Coin (BXA) via the BK Group-affiliated Blockchain Exchange Alliance, with the assurance that BXA would be listed on Bithumb.

Kim used some of the proceeds from the BXA presale, about $25 million, to purchase his stake in Bithumb. The token was also sold to numerous other investors, accumulating approximately $45 million in sales. 

However, Bithumb did not eventually list BXA on its platform, resulting in Kim’s acquisition of Bithumb failing and causing other investors to suffer significant losses. According to prosecutors, Lee had no intention of listing the token as it was part of his elaborate ploy to defraud his partner. 

The affected investors sued both Lee and Kim for fraud. However, South Korea’s investigative agency concluded that Kim was also a victim, just like the other investors involved in the BXA token sale.

Prosecutors are pushing for Lee to be convicted of fraud based on South Korea’s Act on the Aggravated Punishment of Specific Economic Crimes. Lee’s sentencing hearing is scheduled for December 20.

Prosecutors: The Damage is Very Large

During a hearing before the Seoul Central District Court, prosecutors pointed out that “the amount of damage is very large, and the damage is especially great for ordinary coin investors.”

Lee’s attorney, however, claimed that the token sale was “faithfully” carried out according to the usual procedure.

“The structure of this case is a typical stock sale contract. The negotiation took place for 90 days,” the lawyer said. 

The attorney further alleged that BK Group’s Kim sued Lee to avoid criminal responsibility for his part in the complete failure of the BXA token sale.

Lee Apologizes 

In his statement, Lee apologized for his actions, saying: 

“Bithumb was the number one exchange in Korea at the time of sale. I am very sorry for making it difficult for employees and causing social pressure.”

Meanwhile, earlier in July, crypto derivatives exchange FTX revealed plans to acquire Bithumb as part of its expansion plan amid the ongoing crypto winter. It remains to be seen if the Sam Bankman-Fried exchange will proceed with the acquisition plans in light of recent developments.