South Korean Crypto Executives Detained Over Alleged Embezzlement

South Korean Crypto Executives Detained Over Alleged Embezzlement

By Rebecca Campbell - min read
Updated 22 May 2020

Four executives from two of South Korea’s cryptocurrency exchanges have reportedly been detained over alleged embezzlement of customer assets amounting to billions of won.

Kim Ik-hwan, the CEO of Coinnest, and South Korea’s fifth biggest digital currency exchange is one individual that has been detained and questioned over embezzlement charges, reports Reuters. The remaining suspects involved have yet to be named.

According to the Seoul Southern District Prosecutors’ Office, they are alleged to have swindled billions of won from customers’ accounts before transferring it to their own. This is the first time that an operator of a cryptocurrency has been taken in for questioning in the East Asian nation.

It is also the first legal action taken by the prosecutors’ office since it carried out a three-day raid in mid-March to the offices of three cryptocurrency exchanges that were suspected of embezzling customer funds. At the time, however, it was reported that it was unclear whether the transactions were seen as embezzlement.

With Coinnest’s alleged involvement in this latest incident prosecutors will next determine whether to issue arrest warrants for the detained exchange employees. They are also planning on investigating other cryptocurrency exchanges for possible crimes. In February, the Korea Customs Service reported that there had been around $600 million worth of digital currencies illegally exchanged in the country.

Last September, South Korean authorities banned the trading of initial coin offerings (ICOs) over the fear of money laundering and tax evasion. Yet, it doesn’t seem as though that ban was put into practice. With the mistaken impression that South Korean authorities would be tracking a similar path to China, in recent months local reports suggest that the country is considering new regulations that would permit ICO trading for domestic traders.

South Korea is also discussing the introduction of a licensing system to regulate cryptocurrency exchanges similar to New York’s BitLicense, according to a report from the BusinessKorea.