South Korean prosecutors indict former Bithumb president in $ 100 million fraud investigation
South Korean prosecutors indicted Lee jung hoon – the former chairman of Bithumb Holdings, the parent company of Bithumb Korea, which operates Bithumb’s crypto exchange – for fraud.
The Seoul Central District Prosecutor’s Office indicted Lee on Tuesday, but did not take him into custody.
According to an investigative report released by prosecutors, Lee allegedly defrauded $ 100 million from Kim Byung Gun, chairman of the BK Group and founder of a cosmetic surgery clinic line, in a deal to negotiate the acquisition of Bithumb Holdings by Kim.
Lee requested $ 100 million upfront as a “contract fee” from Kim, according to the report. In return, Lee promised to list the BXA token on the Bithumb crypto exchange. The BXA token is issued by the Blockchain Exchange Alliance, which was formed by Kim and a consortium affiliated with the BK Group in December 2018.
BK Group, of which Kim is the sole owner, is based in Singapore and part of a business empire that started as a cosmetic surgery clinic in Seoul. BK stands for “Beauty Korea”.
Lee reportedly told Kim that he could pay the remaining acquisition costs using the money earned from the BXA token list. The idea was for Kim to profit from the sale of BXA tokens on Bithumb and then use that money to pay for the acquisition of Bithumb. Kim had initially agreed to pay $ 400 million for a 50% stake in Bithumb Holdings.
The BXA token has never been listed on Bithumb. Prosecutors say Lee never intended to list BXA on Bithumb and the promise to list the token was just a ploy to quickly get money from Kim and defraud investors.
Lee managed to secure 8 billion won ($ 7 million) from more than 50 investors for the BXA project. He also pre-sold around 30 billion won ($ 26.4 million) in BXA tokens on the promise that the tokens would be listed on Bithumb. These investors ended up suing Lee and Kim for fraud in March 2020, but charges against Kim have since been dropped.
Buyers of the pre-sold BXA tokens filed their own lawsuit against Lee and Kim in April, but charges against Kim in that case were also dropped.
Police investigators determined that Kim was also the victim of a fraud perpetrated by Lee.
Prosecutors said they decided not to detain Lee because he had been “cooperative in all investigations” and confiscated 70% of the aforementioned $ 100 million from the state.