|Lee Jeong-hoon, former chairman of Bithumb Korea and BIthumb Holdings Korea Times file|
Crypto exchange desperate to rehabilitate tarnished reputation
By Lee Kyung-min
Cryptocurrency exchange, Bithumb said Thursday that it will deny membership to foreign clients whose identity cannot be verified via local mobile carriers, starting at 3 p.m., July 13 (KST).
Also to be denied membership are foreign residents of Korea who do not possess an alien registration card (ARC), without which their request for mobile service subscription will be denied.
These are among measures to strengthen anti-money laundering involving digital assets, increasingly being linked to international crimes.
The hurriedly arranged announcement stressing its compliance and customer protection efforts is intended to divert customers' growing complaints about the firm's mismanagement, as evidenced by the indictment two days earlier of its de facto owner Lee Jeong-hoon, 45, who faces charges of fraud in the amount of over 112 billion won ($100 million).
The four countries were added to the list of "jurisdiction under increased monitoring" based on the decision made at the June 2021 Financial Action Task Force (FATF) plenary. The FATF issues global, binding standards to prevent the misuse of virtual assets for money laundering and financing of terrorism.
Services were already blocked to those staying in the four countries, and requests for new membership from there will be denied. These measures are in place for 20 countries including North Korea and Iran.
The exchange said it was the first to set up an anti-money laundering center and is striving to prevent money laundering through reporting suspicious transactions and customer verification efforts.
It teamed up with OCTASolution and developed anti-money laundering and fraud detection systems designed to identify irregularities involving crypto exchange operators.
Meanwhile, the Seoul Central District Prosecutors' Office said that Lee, the former chairman of Bithumb Korea and Bithumb Holdings, was indicted without detention on charges of fraud, Tuesday.
Lee was indicted for defrauding BK Medical Group Aesthetic Clinic CEO Kim Byung-gun out of $100 million for a down payment in what later became a failed equity sale of Bithumb stakes.
Prosecutors say Lee made a proposition to Kim on the joint management and equity purchase of the exchange in October 2018, based primarily on his plan to list Blockchain Exchange Alliance (BXA) coins on Bithumb, despite his clear inability and lack of intention to list them.
Lee asked for a down payment in what he claimed was only a fraction of the profit certain to be generated once the BXA coins were listed and sold. But the listing did not materialize and Kim did not acquire Bithumb.
Lee was not physically detained despite the large amount of money involved, the prosecution said, because he fully cooperated with the investigation and about 70 percent of the down payment was used to pay capital gains tax.
However, the prosecution charges that Lee caused about 22 billion won in losses, recognizing most of the losses were suffered by BXA coin investors whose entire investment pool was managed by Kim and handed over to Lee in return for equity sales of Bithumb shares.
Lee's indictment came just a year after he became chairman of Bithumb Korea and Bithumb Holdings, a dramatic move that sought to dispel criticism over the lack of transparency in the ownership structure of the county's leading exchange.
According to CoinMarketCap, one bitcoin is traded for $33,370, as of Thursday afternoon, down 4.1 percent, or $1,411, from a day earlier and down 2.99 percent from a week earlier.