Friday, December 2, 2022

Co-Founder of Korean Exchange CoinNest Arrested in Seoul

Co-Founder of Korean Exchange CoinNest Arrested in Seoul

According to local reports, the co-founder of Korean cryptocurrency exchange CoinNest has been arrested in Seoul, on suspicion of embezzling customers’ funds. It’s the first time a digital asset exchange operator has been arrested in Korea after months of rumors over crackdowns, but appears separate to the legality of cryptocurrency trading itself.

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Naver News reported CoinNest co-founder Kim Il-hwan was arrested by the Seoul Metropolitan Government’s Financial Investigation Division 2 on Monday. It followed an investigation that actually began last December and a 20-day examination of the exchange’s books.

Specific details are limited and translated reports are still the main source, but they allege Kim had removed funds from customer trading accounts. Prosecutors are also looking at other exchanges suspected of similar behavior, they said.

Part of Attempts to Better Regulate Korean Crypto Exchanges

South Korean government officials have made ambiguous and sometimes contradictory statements about how the country would regulate cryptocurrency exchanges. Though the same officials have later clarified their positions at formal press events, news rumors and the language/cultural barrier have been blamed for causing various asset prices to both soar and tank in recent months.

CoinNest logo

The country has become a hotbed for digital asset trading in the past year as volumes shifted away from China, regulation in Japan tightened, and unclear local laws permitted a degree of anonymous and unregulated activity.

The government has since said it does not intend to ban cryptocurrency trading per se, but will investigate exchanges it sees as acting improperly or breaking existing financial and consumer laws, and require users to verify IDs.

It appears CoinNest was one of the exchanges the regulators were watching. The Naver News report said authorities had investigated three separate exchanges since December.

CoinNest’s Popularity and Partnerships

Though a well-known name in Korea, CoinNest is a fairly minor digital asset exchange internationally, ranking 76th on CoinMarketCap for trade volumes. According to that data, its largest trade volume was in the TRON token, which (in USD value) was worth three times that of the next two post popular assets, bitcoin (BTC) and ether (ETH).

Its fourth most popular asset was the native token for Indonesian exchange Pundi X (PXS). In February, CoinNest had announced a strategic partnership with that company and said it would issue 300,000 Pundi X Pass cards, an NFC-enabled physical multi-currency (fiat and cryptocurrencies) wallet.

However there are no reports the exchange is involved in CoinNest’s current problems in any way. Pundi X CEO Zac Cheah said of the day’s events:

“The CoinNest team is the most active in Korea with altcoins. They’re a hardworking team, and it’s unfortunate to see this happen. We hope the issue gets resolved, and so does the operation of the exchange. Korea is one of the important markets for Pundi X as we are in talks with multiple business partners, and have received growing interest in our products here. It’s business as usual for Pundi X in Korea, and we will continue our partnerships with our existing and potential partners.”

Bitsonline will continue to monitor this developing story and add more details as they come to hand.

Do you feel your funds are secure at cryptocurrency exchanges? Why or why not? Tell us your thoughts in the comments section.

Images via Pixabay, CoinNest

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