UPbit and Bithumb Facing Owner-related Risks

Cryptocurrency exchanges are required to submit their business plans to the Korea Financial Intelligence Unit of the Financial Services Commission by September this year.

The financial authorities have decided to look more closely into cryptocurrency exchanges and UPbit and Bithumb, the two biggest in South Korea, are drawing particular attention.

Every exchange must submit its business plan to the Korea Financial Intelligence Unit of the Financial Services Commission by September this year and the plan must include whether any illegal act has been committed within five years by, for example, its major shareholder, representative or executive. The particular attention is because the largest shareholders in the two exchanges are currently on trial and under investigation.

Dunamu founder Song Chi-hyung is the largest shareholder in Dunamu, which runs UPbit, with a holding of 25.4 percent and is an UPbit inside director. He is currently on trial for fraud and forgery allegations.

Former Bithumb Holdings chairman Lee Jung-hoon, who actually owns Bithumb, violated the Act on the Aggravated Punishment, etc. of Specific Economic Crimes according to the prosecution. Bithumb is run by Bithumb Korea, Bithumb Holdings is the largest shareholder in Bithumb Korea, and the former chairman owns the cryptocurrency exchange via the holding company.

“Owner-related risks and management cannot be separate,” said Korea Capital Market Institute research analyst Hwang Se-woon, adding, “The largest shareholder, even without participation in management, highly influences management decision making by exercising his or her rights and a high level of governance transparency must be ensured in this regard.”