Police Raid Bithumb’s Offices Again as Fraud Investigation Intensifies

Bithumb, one of South Korea’s largest cryptocurrency exchanges, appears to be amid another inquiry from the country’s law enforcement. This week, local news source Seoul Shinmun reported that the Seoul Metropolitan Police Agency had conducted a search and seizure operation at the exchange’s offices.

The BKA Token Bites Bithumb Once More

According to the report, the police raided Bithumb’s location in the Gangnam District yesterday. An official told the news medium that the operation aimed at retrieving additional information that could help bring clarity to the allegations against Lee Jung-hoon, Bithumb Korea and Bithumb Holdings’ board chairman.

The bone of contention is the BXA token, an asset that Bithumb had initially promoted as being its native token on its trading platform. However, things didn’t quite work out, and investors were quick to cry foul.

Lee was eventually charged with fraud, as was Byunggoon Kim, the chairman of BK Medical Group. Investors claimed that they had lost 30 billion won (about $25 million) from the scheme.

Last week, the investigations intensified when Seoul Shinmun reported that an intelligence crime unit at the Seoul Metropolitan Police Agency had raided the company’s offices in the same location. The exchange has remained silent about the developments, as well as the progress concerning Lee’s charges.

Another Challenge to Deal With

The investigations add to what is becoming a distressing year for Bithumb, while it is still South Korea’s largest crypto exchange, it has been mired in several controversies recently.

Last week, FN News reported that the Seoul Central District Court had found Bithumb liable for a data breach in 2017. Per the report, the plaintiffs — named Seo and Hong — claimed that they suffered a phishing attack using private data that hackers managed to get from Bithumb. A third plaintiff, named Jang, also leveled a similar claim against the company.

To conduct the attack, the hacker reportedly impersonated a Bithumb customer support agent. He provided Jang with information that only Bithumb would have. The hacker then told Jang that he had a suspicious login attempt on his account. To prevent “fraud,” he needed a verification code sent to his phone number. Armed with the verification code, the hacker converted Jang’s assets — comprising majorly of Ether and XRP – into fiat and withdrew them.

In all three cases, the court pointed out that Bithumb was guilty of negligence. The judge pointed out that the exchange could have allocated more security resources to prevent data breaches and attacks.

Altogether, Bithumb was liable for paying $38,000, $126,000, and $5,000 to the three plaintiffs respectively. Scandals like these are coming in a year when Bithumb had planned to expand its business significantly. In June, MoneyToday reported that the exchange had planned to conduct an Initial Public Offering (IPO). It even reportedly picked Samsung Securities to be its underwriter.

The IPO plans could now be in jeopardy. Lee is the CEO of Bithumb Holdings, which currently holds a 74.1 percent stake in the company. His involvement in fraudulent operations could undermine the company’s credibility, to say the least.