South Korean Prosecutors Investigate Bithumb Exchange for Alleged Fund Misuse

TLDR

• South Korean prosecutors raided Bithumb’s headquarters on March 19 investigating potential corporate fund misuse
• Former CEO Kim Dae-sik allegedly used a 3 billion won ($2.3 million) company lease deposit to purchase a personal apartment
• Bithumb acknowledged the allegations, stating Kim took an external loan after the initial investigation and has repaid the funds
• The raid comes amid Bithumb’s push toward an IPO planned for 2025
• Separate allegations claim Bithumb and Upbit facilitated token listings through intermediaries charging projects between $2-10 million

South Korean prosecutors raided the headquarters of cryptocurrency exchange Bithumb on March 19. The search was part of an investigation into alleged corporate fund misuse by the company’s former CEO.

Authorities from the Seoul Southern District Prosecutors’ Office searched Bithumb’s offices in Yeoksam-dong. They are looking into claims that the exchange provided a 3 billion won ($2.3 million) lease deposit to its former CEO, Kim Dae-sik.

Investigators suspect Kim used these funds to buy a personal apartment in Seoul’s Seongsu-dong district. Kim currently serves as an advisor to the company after stepping down as CEO.

The initial investigation was conducted by the Financial Supervisory Service (FSS), South Korea’s financial regulator. The FSS later transferred the case to prosecutors for further action.

A Bithumb spokesperson has acknowledged some of the allegations in an interview with The Chosun Daily. The representative confirmed that Kim had taken a loan from an external lender following the FSS investigation.

The company also stated that Kim has since repaid the funds in full. Despite this repayment, prosecutors are continuing their investigation.

They are reviewing whether the original transaction broke financial regulations or corporate governance rules. This case has intensified scrutiny over Bithumb’s internal financial management practices.

Exchange Governance in Question

The raid comes at a challenging time for Bithumb. The exchange has been working toward a long-awaited initial public offering (IPO).

CEO Lee Jae-won recently reaffirmed the company’s plan to list on the stock market in 2025. The company has made structural changes to reduce legal risks connected to key shareholders.

In 2021, Bithumb faced another legal challenge. The former board of directors chairman, Lee Jeong-hoon, was indicted on alleged fraud charges.

However, South Korea’s Supreme Court later acquitted the Bithumb executive. This acquittal has allowed the exchange to move forward with its IPO plans.

Bithumb’s IPO plans date back to 2020 when local media first reported on them. The company chose an underwriter for its IPO in 2023, renewing interest in its stock market debut.

In 2024, Bithumb Korea set up a non-exchange business to speed up its plans to enter the stock market. However, this news came alongside reports of a 57% loss in annual revenue for the exchange operator in 2023.

Beyond the fund misuse allegations, Bithumb faces other controversies. There are separate claims that both Bithumb and rival exchange Upbit facilitated token listings through intermediaries.

According to researcher Wu Blockchain, some crypto projects paid between $2 million and $10 million to secure listings on the exchanges. The report suggests certain intermediaries had connections to Upbit shareholders and market makers.

These intermediary fees reportedly ranged from 3% to 5% of total token supplies. Upbit has denied these claims and demanded that Wu Blockchain provide evidence.

Upbit asked for “the list of digital asset projects that have paid the brokerage fees” and requested “specific evidence and data” to support the accusations. The exchange also requested more information about the alleged illegal brokerage activities.

The current investigation has raised concerns about broader governance issues within Bithumb. The exchange has faced repeated legal and regulatory scrutiny in recent years.

South Korean authorities continue to monitor the country’s crypto sector for potential misconduct. The outcome of this investigation could impact Bithumb’s IPO plans and its standing in the Korean cryptocurrency market.