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Crypto exchange FTX is reportedly in talks to buy Bithumb. The legal issues connected to its former chairman will, however, hinder any possible sale.
According to reports, Lee Jung-hoon, the de facto owner of the South Korean bitcoin exchange Bithumb, is now facing an 8-year jail sentence.
The owner who is also a former chairman of Bithumb Holdings is accused of committing a large-scale fraud worth around 100 billion won ($70 million). Lee was indicted by South Korean prosecutors in July 2021 on charges of fraud under the Act on Specific Aggravated Punishments. Lee allegedly stole millions of dollars from Kim Byung Gun, chairman of the BK Group, in the process of acquiring the Bithumb exchange.
The jointly registered BTHMB consortium was scheduled to receive a 50% stake in the trading platform for $400 million.
The pair agreed to work together in October 2018 after Lee Jung-hoon proposed to BK Group Chairman Kim Mo that they acquire Bithumb. Kim subsequently paid Lee a $100 million “contract fee” after the agreement that was supposed to finance the listing of the BXA token, which was issued by the BK Group-affiliated Blockchain Exchange Alliance, on the Bithumb exchange.
The remaining acquisition costs were intended to be covered by the revenue generated from the possible listing. However, the token was never listed on the exchange, which led to Kim suing his partner in 2020.
Kim later suspected Lee, alleging that he had spent some of the proceeds from the BXA pre-sale as money to buy his shares in Bithumb. Both Kim and Lee were sued by victims who had invested in BXA. No charges were filed against Kim after prosecutors found out he was also a victim of Lee’s fraudulent activities.
Kim had previously sued Lee to avoid criminal liability for investment victims.
Crypto exchange FTX is reportedly in talks to buy Bithumb. The legal issues connected to its former chairman will, however, hinder any possible sale. Prior to the exchange’s legal uncertainties, Nexon, Naver, JPMorgan, and even Deutsche Bank were believed to be among its bidders. However, these transactions fell through.
However, earlier this week, crypto exchange Bybit announced an investment in T-Scientific, the third-largest shareholder in the South Korean cryptocurrency exchange Bithumb, for 5.5 billion won ($3.8 million). T-Scientific (057680) is listed on the South Korean stock exchange.
For cryptocurrency exchanges, this year has been a rollercoaster. Crypto exchanges have been the target of numerous cyberattacks and fraud schemes in 2022, some of which have caused the demise of exchanges.
Mango Markets, Nomad, Qubit QBridge, Axie Infinity, and a few other companies have all been the target of hacks or other types of embezzlement from key individuals within the firm.