South Korean Prosecutors Raid Bithumb Over Alleged $2.3 Million Corporate Fund Misuse

South Korean Prosecutors Raid Bithumb Over Alleged $2.3 Million Corporate Fund Misuse

TLDR

• South Korean authorities raided Bithumb headquarters on March 19-20 investigating possible misuse of corporate funds
• 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 incident but stated Kim repaid the funds after taking a loan following an FSS investigation
• The raid comes as Bithumb is working toward an IPO planned for 2025
• Separate allegations claim both Bithumb and rival Upbit facilitated token listings through intermediaries charging projects between $2-10 million

South Korean prosecutors raided the headquarters of cryptocurrency exchange Bithumb on March 19-20 as part of an investigation into alleged misuse of corporate funds.

The Seoul Southern District Prosecutors’ Office searched Bithumb’s offices in Yeoksam-dong, looking into claims that the company provided a 3 billion won ($2.3 million) lease deposit to its former CEO.

Authorities suspect that Kim Dae-sik, Bithumb’s former CEO and current advisor, used a portion of these funds to buy a personal apartment in Seoul’s Seongsu-dong district. The case has brought fresh scrutiny to the exchange’s financial practices.

The Financial Supervisory Service (FSS), South Korea’s financial regulator, first examined the case. They later transferred their findings to prosecutors for further investigation.

In an interview with The Chosun Daily, a Bithumb spokesperson acknowledged some of the allegations. The representative confirmed that Kim took a loan from an external lender after the FSS investigation.

The spokesperson added that Kim has since repaid the funds spent on the apartment purchase in full. Despite this repayment, prosecutors are reviewing whether the original transaction broke financial regulations or corporate governance rules.

Bithumb IPO Plans

The raid comes at a time when Bithumb is 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.

As part of these preparations, Bithumb has made structural changes. These changes aim to reduce legal risks tied to key shareholders.

Bithumb’s IPO plans date back to 2020 when local media first reported the exchange was preparing for a stock market launch. However, the company faced many obstacles that prevented it from moving forward.

In 2023, the company chose an underwriter for its IPO plans. This renewed talk that Bithumb was working toward going public.

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

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

Adding to Bithumb’s troubles are separate allegations about token listing practices. Reports claim that both Bithumb and rival exchange Upbit facilitated token listings through intermediaries who charged projects large fees.

Researcher Wu Blockchain reported that some projects paid between $2 million and $10 million to secure listings on the exchanges. The allegations suggest that certain intermediaries had ties to Upbit shareholders and market makers.

According to the report, these intermediary fees sometimes ranged from 3% to 5% of entire token supplies. This has raised questions about the fairness and transparency of the listing process.

Upbit has denied these claims. The exchange has demanded that Wu Blockchain provide a list of projects that allegedly paid brokerage fees and asked for evidence to support the accusations.

In 2021, Bithumb faced another legal challenge when its former board of directors chairman, Lee Jeong-hoon, was indicted on alleged fraud charges. South Korea’s Supreme Court later acquitted the Bithumb executive.

With this legal hurdle cleared, the exchange is expected to accelerate its IPO plans for 2025. The outcome of the current investigation may impact these plans.

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