South Korean Authorities Raid Bithumb Over Fund Misuse Allegations

TLDR

Table of Contents

South Korean prosecutors raided Bithumb’s headquarters investigating alleged misuse of corporate funds by former CEO Kim Dae-sik
Kim allegedly used a 3 billion won ($2.3 million) lease deposit to purchase a personal apartment
The funds have reportedly been repaid after an initial investigation by the Financial Supervisory Service
The raid comes amid Bithumb’s push for an IPO planned for 2025
Separate allegations claim Bithumb and Upbit facilitated token listings through intermediaries who charged projects between $2-10 million

South Korean authorities raided the headquarters of crypto exchange Bithumb on March 19. The Seoul Southern District Prosecutors’ Office searched Bithumb’s Yeoksam-dong offices as part of an investigation. They are looking into claims that the exchange provided a 3 billion won ($2.3 million) lease deposit to former CEO Kim Dae-sik.

Prosecutors suspect Kim used these funds to purchase a personal apartment in Seoul’s Seongsu-dong district. Kim currently serves as an advisor to the company after stepping down as CEO. The investigation follows an initial probe by the Financial Supervisory Service (FSS), South Korea’s financial regulator.

A Bithumb spokesperson acknowledged that Kim had taken a loan from an external lender after the FSS investigation. They also stated that Kim later repaid the funds in full. Despite this repayment, prosecutors are reviewing whether the original transaction broke financial regulations or corporate governance rules.

IPO Complications

The timing of the raid creates complications for Bithumb’s business plans. The exchange has been working toward an initial public offering (IPO) for several years. CEO Lee Jae-won recently reaffirmed the company’s intent to list on the stock market in 2025.

Bithumb has made structural changes to minimize legal risks tied to key shareholders. The company has reorganized to eliminate judicial risks that might affect major shareholders. These efforts are part of a push to expedite the long-awaited IPO process.

The exchange’s IPO plans date back to 2020 when local media first reported on the preparation for a stock market launch. In 2023, the company chose an underwriter for its IPO plans, showing renewed interest in going public.

Listing Fee Allegations

The raid comes amid separate allegations about token listing practices. Researcher Wu Blockchain reported that Bithumb and rival exchange Upbit may have facilitated token listings through intermediaries. These intermediaries allegedly charged projects hefty fees for listings.

Some projects reportedly paid between $2 million and $10 million to secure listings on the exchanges. The allegations suggest certain intermediaries had connections to Upbit shareholders and market makers. Fees allegedly ranged from 3% to 5% of token supplies for some projects.

Upbit has strongly denied these claims about listing fees. The exchange demanded that Wu Blockchain provide evidence and a list of projects that allegedly paid brokerage fees.

Legal History

This is not the first time Bithumb has faced legal scrutiny in recent years. In 2021, the company’s former board chairman, Lee Jeong-hoon, was indicted on alleged fraud charges. This legal issue was one of several obstacles that prevented the exchange from successfully conducting an IPO earlier.

South Korea’s Supreme Court eventually acquitted the Bithumb executive. This acquittal has helped clear one hurdle for the exchange’s public offering plans. The legal resolution was seen as a positive development for the company’s IPO timeline.

The exchange has faced repeated legal and regulatory scrutiny over the years. These investigations have raised concerns about governance and financial practices within the company.

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