No Illicit Activities: South Korea’s Biggest Cryptocurrency Exchange Cleared by Government
Originally published on: CCN
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June 08, 2018
Bithumb, South Korea’s biggest cryptocurrency exchange, has been cleared by local financial authorities and the National Tax Service (NTS). While the company was ordered to pay $28 million in taxes, the government found no evidence of illicit activities, tax evasion, and suspicious business operations.
No Illegal Activity
For many months, investors in the local cryptocurrency exchange market expressed their concerns regarding the state of UPbit and Bithumb, South Korea’s two biggest cryptocurrency exchanges. Both firms were targeted by the government and were involved in extensive investigations by various government agencies including the NTS, Financial Services Commission (FSC), and Korea Financial Intelligence Unit (KFIU).
Almost immediately after the government initiated a search and seizure on the headquarters of UPbit in Seoul for allegedly deceiving investors with an inflated balance sheet, Bithumb was also investigated by local financial authorities for potential malpractice and suspicious business activities.
Ultimately, the investigation into UPbit came to an end with no additional information disclosed by the government, signifying that the search and seizure initiated on UPbit disclosed no evidence of fraudulent operations. This week, it was revealed that the government’s investigation into Bithumb was also closed with no evidence of illicit activities.
According to the NTS, the agency closed its investigation into Bithumb in late April, imposing a $28 million tax on the company.
On January 10, the NTS along with other local financial authorities sent dozens of government officials to the headquarters of the exchange in Seoul, seizing various computer files, devices, and information necessary to run a full audit on Bithumb’s cryptocurrency holdings and past activities.
The three-month long investigation, which the government described as an intense and extensive inspection, focused on the balance sheet and transaction history of the company, primarily to evaluate the tax payouts of the exchange.
The NTS revealed that Bithumb has paid all of the required taxes to the government to generated from the company’s massive profits produced from transaction and trading fees. The investigation led by officials from NTS and three major government agencies went on from January 10 to late April.
The exchange became the primary target of NTS in the cryptocurrency sector after the company demonstrated a 171-fold increase in its profits within a 12-month period, supported by a rapid surge in demand for cryptocurrency in the local market. The NTS wanted to ensure that every cryptocurrency business in South Korea settles taxes with the NTS and disclose all of their holdings, gains, and losses.
“NTS initiated several investigations into Bithumb between 2014 and 2017, and over the past four years, Bithumb has continuously paid all of the taxes imposed to the company without any conflict with the NTS. While a $28 million tax was imposed onto Bithumb, no evidence tax evasion and illicit activities was shown and the NTS closed the investigation into Bithumb officially, clearing the company,” a NTS spokesperson said.
The clearance of Bithumb is symbolic and is beneficial to the entire cryptocurrency industry because the NTS initially planned to create an example out of the exchange to prevent any other company in the local cryptocurrency market from evading taxes. The clearance of Bithumb added legitimacy to the cryptocurrency sector in South Korea, which may assist companies in regaining the trust from local investors.
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