Bithumb chair in fraud allegations

Two men in South Korea are continuing a serious disagreement over which of them is responsible for an alleged fraud.

The disagreement focuses on a token called BXA, which has since been hit with controversy after investors attempted to sue those behind it.

The pair are also accused of breaking a law relating to foreign exchange transactions.

However, the two men, Junghoon Lee and Byunggoon Kim, are arguing over who was responsible for its promotion.

Lee is the chair of Bithumb Korea and also of the holding company, Bithumb Holdings.

Bithumb is one of the largest exchanges in the country.

Kim, meanwhile, is chair of BK Medical Group.

According to press reports, the BXA token was – at first, at least – described as a potential native token for the Bithumb platform.

However, this later went seriously wrong, and traders collaborated to press charges.

Where the charges should be focused, however, is under dispute.

It is understood that the level of damages in the case is close to US$25m.

In another twist to the tale, Kim is accused by police of having broken the country’s Forex Transactions Act.

According to the wording of the Act, it aims to “contribute to the development of the national economy by striving to facilitate foreign transactions”.

It is also there to “maintain a balance of international payments and to stabilize the value of currency by ensuring the liberalization of foreign exchange transactions and of other foreign transactions and by revitalizing market functionality”.

Some of Bithumb’s holdings are believed to be kept in Singapore rather than South Korea, which complicates the picture.

Under this Act, disposing of shares sometimes has to be listed as a capital transaction.

While it is the case that Kim exchanged his shares in Bithumb Holdings, it remains unclear whether it required full disclosure under the country’s forex laws.

The pair are both physically located in South Korea but are in quarantine due to the coronavirus.

They are unlikely to meet until they are permitted to leave quarantine.

In a statement, Lee denied any responsibility for the fraud.

He said that all responsibility lies with Kim, who was then the CEO of BK Consortium.

However, Bithumb does not appear to be holding back with its plans for growth and expansion.

Last month, news stories in the finance press suggested that the firm was even considering an initial public offering, which would see it place itself on the stock markets.

However, the ongoing issue with investors and the related lawsuit may not be the only block to this plan.

The firm is also embroiled in an alleged scandal involving tax.

Earlier this year, the firm objected to the imposition of a tax bill it received, claiming that it should not have to pay $69m.

“We paid the full amount and have since been preparing for arguments. We believe we will be given a chance to clarify our stance in court,” it said at the time.

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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