The largest crypto exchange in South Korea is in deep legal trouble. Bithumb, which is not only the largest exchange in South Korea but also in the top 5 crypto exchanges in the world with hundreds of millions of dollars of trading volume per day, has been seized by police amid fraud allegations.
The Seoul Metropolitan Police Intelligent Crime Investigation Unit has seized Bithumb’s headquarters, and is searching the headquarters for evidence.
This sudden seizure of Bithumb is due to allegations of investment fraud. Basically, back in 2018 BK Group was about to acquire Bithumb, but the deal fell through at the last minute.
One of the conditions of the acquisition deal was that Bithumb would list BXA token, and this caused a speculative frenzy around BXA token leading to 30 billion Won ($25.7 million) being raised in an initial coin offering (ICO). However, Bithumb did not list BXA token due to the acquisition deal falling through, and BXA token collapsed in value.
Apparently where Bithumb really went wrong in this case is that they hyped up BXA token and assured it would be listed, ultimately leading to monetary damage to the investors.
Zooming out, it appears a wider crypto crackdown is occurring in South Korea. Just a week ago another South Korean crypto exchange, Coinbit, was seized by the police over allegations that Coinbit earned 100 billion Won ($84 million) of unfair profits due to inflating their trading volumes.
Further, any crypto exchanges remaining in South Korea will face extremely strict rules starting next year, which brings into question the future of crypto in South Korea.
On a final note, it is unclear if Bithumb has been shut down, or if the headquarters has been seized but the exchange remains operational. If Bithumb really does get shut down, it will be a blow for the global crypto industry, since a significant amount of global crypto volume and demand goes through Bithumb.