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Three South Korean Crypto Exchanges Raided for Diverting Funds


South Korean prosecutors have searched the offices of three cryptocurrency exchanges suspected of buying bitcoin with money stolen from customers’ accounts. According to authorities, the companies turned up on the radar during investigations of dubious transfers in January. The raids have been conducted this week.

Also read: Growing Number of South Korean Crypto Exchanges Participate in Self-Regulation


Embezzled Funds Spent on Cryptos Elsewhere

South Korean law enforcement officials have raided three companies offering cryptocurrency exchange services, local media reported. The searches have been conducted this week after an earlier investigation into suspicious money transfers.

Three South Korean Crypto Exchanges Raided for Diverting FundsProsecutors are investigating three cryptocurrency trading platforms on suspicion of buying bitcoin with money they stole from their customers’ accounts, the Chosun Ilbo reported. The Seoul Southern District Prosecutors’ Office raided the exchanges from Monday through Wednesday, a spokesman said, quoted by the daily.

According to South Korean authorities, executives and staff are believed to have diverted funds from customers’ accounts towards their own. They were then used to buy cryptocurrencies on other exchanges. Investigators will also try to find out if the companies have raised money by defrauding potential investors.

“The firms turned up on our radar in January, during our investigation of suspicious money transfers between bitcoin exchanges”, a prosecutor explained. The transactions were detected during an audit by the Financial Services Commission and the Financial Intelligence Unit. Hard disks, transfer receipts, mobile phones, and accounting files have been confiscated during the raids.


Theft and Fraud amid Regulatory Pressures

South Korean authorities have been trying hard to put the local crypto sector under control. A new mechanism to end anonymous trading was implemented earlier this year. Its main purpose is to enforce real name identity verification on traders. The Financial Services Commission and the Korean Financial Intelligence Unit conducted inspections in leading commercial banks, targeting accounts of cryptocurrency traders. Banks had been ordered to stop issuing “virtual accounts” used by crypto exchanges to manage their clients’ money.

Regulating and overseeing crypto activities has proved a tough task, however. Korean officials have complained about their limited powers within the existing legal framework. Nevertheless, Seoul authorities have announced stricter requirements for cryptocurrency exchanges, including measures against crypto-related crimes. The country is home to some of the largest providers of cryptocurrency exchange services in the world.

In January, the chairman of the South Korean Fair Trade Commission admitted it was “impossible in reality” to close cryptocurrency exchanges, as news.Bitcoin.com reported. His comments came during an investigation of 13 major trading platforms, following alleged violations of the e-commerce law. At the same time, the local crypto sector has taken steps towards self-regulation. At least 25 crypto exchanges are participating in the efforts lead by the Korean Blockchain Association.

Do you think tougher crypto regulations would minimize fraud or self-regulation is a more effective approach in the crypto sector? Tell us in the comments section below.


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15.03.2018 / 11:00 67
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