Prosecutors in South Korea have detained Kang Jong-Hyun, the anonymous chairman and owner of Bithumb, the country's biggest cryptocurrency exchange, on embezzlement and stock manipulation accusations.
Last month, the Seoul Southern District Court issued an arrest warrant for Kang Jong-Hyun on suspicion of embezzlement in connection with his operations at the exchange. The Seoul Southern District Prosecutor's Office also charged his younger sister, Kang Ji-Yeon, and the CEOs of two publicly listed Bithumb affiliates, Inbiogen and Bucket Studio, with identical accusations.
Prosecutors said that these officials violated the duty of trust mandated by the law, as well as embezzling millions of dollars from the corporation. According to South Korean legislation, Bithumb's executives face a significant jail term in addition to penalties.
Kang and other senior executives reportedly used convertible bonds to influence the stock price of Bithumb's subsidiary firms.
In October, another Bucket Studio executive was detained on suspicion of hindering a police investigation. He allegedly attempted to hide or delete important material just before the police conducted onsite searches on three companies with ties to Bithumb.
The news comes as investigators try to solve the mystery behind the exchange's ownership. Park Mo, the vice president of Bithumb's biggest shareholder business, committed himself at his home in late December.
Police and tax authorities also searched Bithumb for possible tax cheating. According to the National Tax Service (NTS), tax inspectors from the nation visited the exchange's headquarters in Seoul as part of an effort to enhance taxes and compliance. The present inquiry covers local and foreign transactions involving Bithumb Korea, Bithumb Holdings, and its affiliates.
The exchange was recently in the headlines when its previous chair, Lee Jung-Hoon, was acquitted on accusations of defrauding the company of $70 million during the purchase of the South Korean cryptocurrency exchange. In another $100 million fraud case, South Korean prosecutors sought an eight-year prison term for Lee Jung-hoon, the de-facto owner of the country's second-largest crypto exchange.
Earlier this month, the South Korean Supreme Court ordered Bithumb to pay over $200,000 in penalties to consumers who suffered as a result of a service outage in 2017. The ultimate result reverses an earlier court judgment in favor of Bithumb versus the investors. Victims are expected to get monetary reparations ranging from $6 to $6,400 for each of the 132 investors who filed a complaint against the crypto exchange operator.
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