South Korea Raids Bithumb Over Alleged $2M Embezzlement by Former CEO

South Korean prosecutors have raided the offices of cryptocurrency exchange Bithumb amid allegations that the company’s former CEO embezzled over $2 million in company funds to purchase a personal apartment. The investigation, which took place on March 20, has raised concerns over potential financial misconduct within the company.

Allegations of Misuse of Funds

The Seoul Southern District Prosecutors’ Office conducted the raid after suspicions surfaced that Bithumb had provided a 3 billion Korean won (approximately $2 million) apartment lease deposit to Kim Dae-sik, the former CEO and board member of the exchange. Kim, who now works as an adviser to Bithumb, is accused of using part of these funds to purchase an apartment for personal use.

While Bithumb has not denied the allegations, the exchange maintains that Kim repaid the funds in full. A Bithumb representative told The Chosun Daily that although some of the claims were accurate, Kim had taken out a loan from a lender after the Financial Supervisory Service (FSS) began its investigation. The funds used for the apartment purchase were reportedly repaid shortly after the loan was secured.

Additional Allegations: Intermediary Fees for Listings

Amid the investigation, rumors have also emerged that Bithumb and another major exchange, Upbit, allegedly received intermediary fees from projects seeking to be listed on their platforms. According to a report by Wu Blockchain on March 20, two unnamed projects claimed to have paid $2 million and $10 million, respectively, to secure a listing on Bithumb and Upbit. The report also suggested that intermediaries connected to Upbit’s shareholders and market makers were involved in these alleged payments. Some sources indicated that the intermediary fees could range from 3% to 5% of the entire token supply.

While these claims have not been fully verified, they add to the growing concerns regarding the financial practices at Bithumb, already under scrutiny for the embezzlement allegations.

Bithumb’s IPO Plans Amid Legal Troubles

The investigation comes at a critical time for Bithumb, as the exchange has been pushing for a public listing. On March 18, reports indicated that Bithumb’s CEO, Lee Jae-won, was accelerating the company’s long-anticipated initial public offering (IPO). The exchange has been preparing for an IPO since 2020, but legal issues, including the indictment of former board chairman Lee Jeong-hoon on fraud charges, have delayed the process.

Despite the challenges, Bithumb is reportedly making efforts to reorganize and mitigate judicial risks tied to its major shareholders in order to expedite its IPO plans. The company aims to go public by 2025, although the road to this goal has been rocky, particularly after the Supreme Court acquitted Lee Jeong-hoon of fraud in a high-profile case in 2023.

In addition to its legal troubles, Bithumb also reported a 57% drop in annual revenue for the fiscal year 2023, adding to the uncertainty surrounding its IPO aspirations. However, the exchange remains committed to the public listing, with renewed efforts in 2024 to establish a non-exchange business under the name Bithumb Korea to further its stock market debut.

Conclusion

As Bithumb faces a growing investigation into financial misconduct, including the alleged embezzlement by its former CEO and potential intermediary fees for listings, the company’s efforts to go public may be further complicated. The raid and the mounting legal issues underscore the challenges Bithumb faces as it seeks to regain trust and stability in a rapidly changing regulatory landscape.