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South Korea’s prominent cryptocurrency exchange, Bithumb, finds itself under intense scrutiny from regulators and members of parliament regarding its complicated ownership structure. In light of these challenges, Bithumb asserts that it is committed to enhancing transparency, particularly as it pursues an initial public offering (IPO).
Intense Regulatory Scrutiny
At a National Assembly meeting held on October 24, 2024, reported by the media outlet Newspim, attendees voiced their concerns and urged financial authorities to intervene in Bithumb’s affairs. The Financial Services Commission (FSC) of South Korea has declared its intention to conduct its own review of the ownership issues surrounding the exchange.
The backdrop of South Korea’s economic situation adds to the urgency. The economy managed to show slight growth in the last quarter, recovering from a contraction, but remains vulnerable due to the faltering export market, geopolitical tensions, and uncertainties stemming from the upcoming U.S. elections.
Ownership Controversies
Bithumb’s ownership structure is marked by controversy, particularly involving two key figures believed to hold significant stakes in firms interconnected with Bithumb. Kang Jong-hyun, a reclusive and contentious individual, has been identified as the “actual owner” of multiple companies with minority interests in Bithumb. His legal troubles include charges of embezzlement and price manipulation related to previous altcoin listings on the exchange. Notably, he reportedly controls Vidente, a publicly listed company that owns a 34.22% stake in Bithumb Holdings.
Additionally, the former CEO of Bithumb, Lee Jung-hoon, has attracted regulatory concerns. Lee stands as the largest shareholder of Bithumb Holdings, allegedly exerting control through minor shareholdings in affiliated companies, alongside holding a 10% stake in Bithumb Holdings. Lee is currently engaged in legal battles following a failed sale of Bithumb to the BK cosmetic surgery group.
Parliamentary Concerns
During the National Assembly meeting, Kwon Seong-dong, a member of the ruling People Power Party, highlighted the pressing issues surrounding Bithumb. He stated, “There are issues with Bithumb, such as the fact that major shareholders are being tried on fraud charges or have been arrested for embezzlement and stock price manipulation. These were all brought up in a 2022 National Assembly audit, yet it appears that the financial regulators still do not fully grasp the situation.”
FSC Seeking Additional Authority
FSC Chairman Kim Byung-hwan responded to the committee’s concerns by indicating that the current legal framework limits the agency’s ability to act. He mentioned that no provisions allow for the review of major shareholders under existing laws specific to financial information or virtual asset protection. Consequently, he has proposed amendments to the Special Financial Information Act to grant the FSC the authority to investigate major shareholders of Bithumb more comprehensively.
Bithumb’s Path to IPO
Founded in 2014, Bithumb’s largest known shareholder is Bithumb Holdings, which holds a considerable 73.56% of the exchange. A company spokesperson recently stated that Bithumb has been working diligently to mitigate risks associated with its ownership structure.
As Bithumb prepares for its IPO, it has decided to separate its crypto exchange operations from other business endeavors, aiming to establish itself as the first cryptocurrency platform listed on a stock exchange in South Korea. The spokesperson revealed that the company’s objective is to complete the IPO process by the end of next year. Originally planning to launch on the domestic Korea Exchange, Bithumb has shifted its focus to seek a listing on NASDAQ instead.
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