Korean Authorities Raid Crypto Exchange Bithumb Over Former CEO’s Alleged Property Fund Misuse

South Korean authorities have turned their attention to Bithumb, one of the nation’s leading crypto exchanges, as a new investigation unfolds. The focus centers on claims that company funds were improperly used to secure an apartment for its former CEO, Kim Dae-sik, raising questions about financial oversight within the exchange.

This probe, initiated by the Seoul Southern District Prosecutors’ Office, comes at a pivotal moment for Bithumb, which is gearing up for a much-anticipated initial public offering. The outcome could ripple through South Korea’s cryptocurrency landscape, potentially influencing both the exchange’s future and broader regulatory approaches.

On March 20, prosecutors conducted a search and seizure at Bithumb’s headquarters in Yeoksam-dong. The operation stems from suspicions that the exchange provided a 3 billion Korean won lease deposit, equivalent to roughly $2.4 million, for an apartment in Seongsu-dong tied to Kim Dae-sik, who now serves as an advisor after stepping down as CEO. Authorities are examining whether a portion of this money was redirected for personal property acquisition, an action that would breach financial regulations.

The Financial Supervisory Service first flagged the issue before transferring it to prosecutors for a deeper legal review. Reports indicate that Kim repaid the full amount using a loan from a third-party lender shortly after the initial inquiry, but investigators are still determining if corporate funds were misused and whether any laws were broken.

Local outlet YTN broke the story, referencing unnamed sources within regulatory circles. Beyond the property allegations, additional concerns have emerged about Bithumb’s operations. Wu Blockchain highlighted claims that projects seeking token listings on Bithumb and its competitor Upbit paid substantial intermediary fees. Two projects reportedly shelled out $2 million and $10 million, respectively, while some fees amounted to 3% to 5% of a token’s total supply. Such practices have sparked speculation about potential market manipulation or undisclosed financial arrangements.

Bithumb has not yet addressed these specific claims publicly, though the exchange has consistently underscored its dedication to regulatory compliance and transparency in past statements. Its history, however, includes tax investigations and fraud probes that have periodically strained its standing with South Korean regulators.

Bithumb’s IPO Plans Face Uncertainty Amid Legal Scrutiny

The timing of this investigation complicates Bithumb’s long-term goals. The exchange has been laying the groundwork for an IPO since 2020, with plans to list on Nasdaq in 2025. On March 18, Business Post reported that CEO Lee Jae-won was spearheading corporate restructuring to minimize legal risks for key shareholders. Progress has been halting, with setbacks tied to earlier legal challenges.

In 2021, former chairman Lee Jeong-hoon faced fraud charges, only to be acquitted by the Supreme Court, a decision that appeared to pave the way for the IPO. Bithumb appointed an underwriter in 2023 and set up a non-exchange business unit in 2024 to refine its operations. Yet, this latest probe introduces fresh uncertainty, potentially shaking investor trust at a critical juncture.

Bithumb’s challenges reflect a wider pattern of regulatory pressure on South Korea’s crypto industry. The exchange has faced multiple office raids since 2018 over issues like tax evasion and price manipulation, though many cases remain unresolved. In December 2024, the former Bithumb exchange CEO was sentenced to two years in prison in a complex scheme of bribery and market manipulation. The government has recently intensified efforts to tighten oversight, emphasizing institutional accountability and investor safeguards. Proposals for a 20% tax on crypto profits have surfaced, though political resistance has stalled implementation.

Should Bithumb be found liable in this investigation, it could face significant penalties, affecting not just its trajectory but also the stability of South Korea’s crypto market. If the allegations prove unfounded, the exchange might bolster its reputation and advance its IPO plans with renewed momentum. For now, the situation remains fluid.