Three cryptocurrency exchanges in South Korea were investigated and raided by the police and financial authorities due to an alleged embezzlement of funds from the accounts of the clients for personal benefit.
Local media report that the offices of three cryptocurrency exchanges that have not been identified yet have been raided this week by the prosecutor from the Seoul Southern District. The raids were organized because of suspicions that the employees of the investigated cryptocurrency exchanges, including the executives, diverted the funds of its clients to buy cryptocurrencies on other exchange platforms.
According to Chosun, the alleged embezzlement of funds was organized with the goal of buying bitcoin and ethereum. Due to these suspicions, the police confiscated hard drives, telephones, documents and accounting files in search of proofs to support the theory of the embezzlement of funds and a possible case of fraud.
The Financial Services Commission (FSC) of South Korea did not reveal the names of the cryptocurrency exchanges in question, nor the names of the employees suspected for the embezzlements of funds. However, according to LiveCoinWatch, a local media assures one of the three cryptocurrency exchanges involved in the case is one of the most important cryptocurrency exchanges in the country, which means they are probably referring to Bithumb, UpBit or Korbit.
Likewise, the police said the exact amount of the diverted funds has not been determined yet, but they assure activities outside the legal course are being conducted in the three cryptocurrency exchanges in the last months. An unknown prosecutor gave a statement to Chosun: “The firms turned up on our radar in January during our investigation of suspicious money transfers between Bitcoin exchanges that were detected during an audit by the Financial Services Commission and the Korea Financial Intelligence Unit.”
Between the grim information available at the moment it is difficult to say how the funds were taken away from the accounts of the users and how the three cryptocurrency exchanges involved in the case are linked between each other.
It is important to point out that, according to the prosecutor’s office, this operation is a joint action between the FSC and the Korea Financial Intelligence Unit (KoFIU), with the goal of protecting the interests of the consumers from illegal market practices. This operation is not directly related to the activities conducted by the government of South Korea when it comes to regulating the cryptocurrency market in the country.
Since January 30th this year, South Korea has a legal frame for the functioning of companies related to the digital currencies, which means the market is being scrutinized by the government in order to prevent possible illegal actions with involving cryptocurrencies. After two frauds that occurred in the middle of the ICO fever, the FSC took measures to bring more control to the cryptocurrency market in South Korea.
Moreover, the Financial Services Commission recently announced it was thinking of starting emitting licenses for the cryptocurrency exchanges and permitting the ICOs (Initial Coin Offerings) again.