Whenever South Korean regulators start thinking of doing something positive with cryptocurrencies, something wrong happens to make them think over their plans from scratch. A few days ago we had heard that the regulators of country may allow ICOs with certain terms and conditions in place, but now some negative news has come once again that may make the regulators pay more attention to their plans. According to local media 3 large cryptocurrency exchanges of the country have been raided by South Korean Prosecutors after reports of embezzlement of funds. It’s suspected that staff of those exchanges – including the management – embezzled public funds to purchase cryptocurrencies from other crypto exchanges.
The news has broken from Korean news site Chosun.com. According to report hard drives, mobile phones, money transfer receipts, accounting files and a variety of other stuff was seized during the raids to search for evidence. It’s also being suggested that these exchanges are also suspected of cheating potential investors to raise money, and prosecutors will investigate them for this charge too. One of the prosecutors reportedly said:
“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.”
However, another report from Finance Magnates goes on to suggest that the executives of these exchanges have already been charged with embezzlement and the exchanges taken over by country’s financial watchdog Financial Services Commission (FSC).
South Korea has been cracking down on cryptocurrency industry since September last year when it first came up with a blanket ban on ICOs. Then in January Financial Supervisory Service of country indicated that it was investigating some members of its own staff for possible insider trading of cryptocurrencies. Same month country’s Customs service had also discovered illegal trading worth $600 million in cryptocurrencies. It’s only recently that we’ve heard the rumors of Korea lifting its ban from ICOs with terms and conditions, but now this embezzlement probe has come in the meantime. Now it will be interesting to see how long it takes for the country to lift its ICO ban.
South Korea already has a set of rules in place that require full disclosure of identity to deal with cryptocurrencies. Exchanges and wallet companies are required to establish the identities of their customers with help of KYC procedures and bank accounts.