South Korea Investigates Three Cryptocurrency Exchanges for Embezzlement

South Korean prosecutors are investigation three cryptocurrency exchanges after it was alleged that they used money stolen from customers’ accounts to buy bitcoin.

In a report from Chosun, a spokesperson for the Seoul Southern District Prosecutors’ Office said that it had searched the offices from Monday through Wednesday. Prosecutors confiscated money transfer receipts, mobile phones, accounting files, and computer hard disks.

It’s reported that staff and executives moved money from users’ accounts to their own in order to make the crypto purchases.

A prosecutor 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.

This news comes at a time when authorities in South Korea are reconsidering its position on initial coin offerings (ICOs). Last September, it was reported that the Financial Services Commission (FSC) had banned ICOs, preventing domestic companies and startups from taking part in them. Notably, though, the regulator didn’t enforce the ban.

Now, though, it appears that South Korean authorities are preparing a plan that would permit ICOs for domestic traders. In a report, an unnamed source said:

The financial authorities have been talking to the country’s tax agency, justice ministry, and other relevant government offices about a plan to allow ICOs in Korea when certain conditions are met.

If introduced this would mark a significant step for a country that has been against the market for some time. The government is also considering a licensing system similar to New York’s BitLicense as a way of regulating digital currency exchanges in the country.

At the time, an official from the government ministry taking part in the digital currency task force, said:

We are positively considering the adoption of an exchange approval system as the additional regulation on cryptocurrencies. We are most likely benchmark the model of the State of New York that gives a selective permission.

It will be interesting to see what sort of impact, if any, the investigation into the three cryptocurrency exchanges with authorities in the country.
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