Former Bithumb Chairman May Face Eight Years in Prison for Alleged $70M Fraud

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Lee Jung-hoon, the former chairman of Bithumb Holdings, the company that operates South Korea’s second-largest cryptocurrency exchange, could face a maximum sentence of eight years in prison if found guilty on charges related to an alleged fraud worth 100 billion won, or roughly $70 million.

The trial took place on October 25 at the Seoul District Court, with the verdict to be delivered on December 20, per local media reports.

According to the prosecution, Lee allegedly received the funds from Kim Byung-gun, the founder of the cosmetic surgery company BK Group in October 2018 while negotiating the sale of the Bithumb exchange.

Kim was reportedly going to buy out a 50% stake in Bithumb, with the $70 million in question raised from investors and paid as an upfront “contract fee” after he was promised the exchange would list the so-called Bithumb Coin (BXA) and use proceeds of the token sale toward the acquisition.

The token, however, was reportedly never listed on Bithumb, and Kim’s acquisition of the exchange fell through.

Notably, investors who invested in BXA sued both parties, but Kim evaded any penalties as prosecutors found him a victim deceived by Lee.

The prosecution described the agreement as a play that Lee began to defraud his partner, emphasizing that the Bithumb founder had no intentions to list the token.

Lee’s lawyer, however, argued that “the structure of this case is a typical stock sale contract” that was carried out “according to typical procedures for such a contract.”

Lee also appealed in his final statement, saying that “Bithumb was the number one exchange in Korea at the time of sale” and apologizing “for making it difficult for employees and causing social pressure.”

More criminal charges against Lee

Notably, the prosecution petition to sentence Lee coincided with South Korean authorities’ move to bring criminal charges against a group of local crypto moguls, including the former Bithumb chairman, for failing to appear before the National Assembly’s audit meeting regarding the collapse of the Terra ecosystem earlier this year.

Witnesses who were summoned but didn’t attend the meeting on Monday—all citing health reasons—also included Kim Seo-joon, CEO of venture capital firm Hashed and an early investor in Terra, Terraform Labs co-founder Shin Hyun-sung,  and Kang Jong-hyun, the current chairman of Bithumb, per The Korea Times.

“The former Bithumb chairman submitted a written statement for his absence once again, even if he exudes enormous influence on the exchange as a major shareholder,” an opposition Democratic Party of Korea representative said at the meeting. “He [Lee] cited health reasons and ongoing lawsuits, but he is scheduled to attend a trial the following day.”

According to the lawmaker, the medical certificate Lee provided in lieu of his absence allegedly showed that “he needs to receive drug treatment for more than three months, but the diagnosis date was 19 months ago.”

The lawmaker reported described Lee’s behavior as “shameless” and requested the Assembly to proceed with bringing criminal charges against him.

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