South Korean prosecutors arrested Kang Jong-hyun, the de-facto owner of Bithumb exchange over alleged embezzlement of funds, as reported by local news outlet JTBC.
Over the last few days, law enforcement have been seeking his arrest and two other executives over breach of trust, embezzlement and fraudulent transactions under the country’s Capital Markets Act, i.e. stock manipulation in this case.
“Kang is accused of conspiring with a business partner to manipulate stock prices and stealing 60 billion won [$48.6 million] from his company,” noted the reporters.
Kang Jong-hyun is the elder brother of Kang Ji-yeon, the head of Bithumb affiliate Inbiogen. The firm holds a 34.2% majority share in Vidente Co., the largest shareholder of Bithumb exchange. The siblings allegedly conspired to pocket corporate funds and influence the stock-market price of Inbiogen and video production firm Bucket Studio through convertible bonds.
The other side of the story
In a letter to shareholders posted on Bucket Studio’s website, Kang Ji-yeon said:
“most of the suspicions surrounding my older brother Kang Jong-hyun… are one-sided claims without fact-checking.”
He added that the investigation will reveal the truth. In the letter, Kang Ji-yeon also said there were no irregularities in the company.
“In addition, we can confidently say that there are no problems with embezzlement or breach of trust within the company.”
The executive promised that all involved will “faithfully cooperate” with the prosecution’s investigation in regards to the allegations.
In December, Mr. Park Mo, the Vice President of the exchange’s largest shareholder, Vindete Co., was found dead in front of his house in Southern Seoul. Park was also under investigation on charges of embezzlement and stock market manipulation.
In 2022, market participants’ trust in crypto companies has gone to the dogs, especially as it relates to leading exchange and lenders, following the continuous stream of high profile fraud. The back-to-back fall of established house-hold names like FTX, Alameda, 3AC, Luna, DCG and others has instilled generalised cynicism and a deep sense of betrayal – which won’t soon be forgotten.
The new year bitcoin rally has helped buttress spirits, but centralised players have a lot of work to do to regain trust, especially when more high-profile arrests such as this are becoming so common.