South Korean Authorities Question Crypto Exchange Executives Over Lawmaker’s ‘Favoritism’ Controversy

South Korea’s police have reportedly summoned executives from the largest local crypto exchanges for questioning regarding allegations of favor-seeking and favoritism from a now-independent lawmaker. Dunamu, Bithumb Executives Summoned By Police On Wednesday, the Seoul Metropolitan Police Agency’s Public Crimes Investigation Unit called former Dunamu CEO Lee Seok-woo and Bithumb officials as witnesses in the investigation of allegations against independent lawmaker Kim Byung-kee. According to local reports , police reportedly questioned the former CEO of Dunamu, the company that operates South Korea’s largest crypto exchange, Upbit, about whether Kim requested employment for his second son during a dinner meeting in November 2024. Kim’s former aides have claimed that the former Democratic Party’s floor leader had shown significant interest in crypto-related companies such as Dunamu and Bithumb, the second-largest crypto exchange in the country, for his son’s employment. However, after failing to secure a spot at the local industry leader, the lawmaker allegedly arranged for his son to work at Bithumb, where he worked for six months, starting in January 2025. A former aide told reporters in December that Kim had “originally tried to get him hired at ‘somewhere else,’ but when that fell through, he got him hired at Bithumb.” The reports alleged that Kim had instructed his aides to “attack Bithumb’s competitors” after the meeting with former CEO Lee and a job opening at Bithumb in November. He seemingly affirmed that “Dunamu’s monopoly is a complete problem.” The lawmaker has been accused of seeking to favor the crypto exchange his son worked for by repeatedly questioning Dunamu “in a manner intended to attack it” during Political Affairs Committee meetings. Kim told then-Financial Services Commission (FSC) Chairman Kim Byung-hwan that “the biggest problem with Korea’s virtual asset exchanges is the monopoly of a specific exchange,” the reports noted. He also pointed out a Financial Intelligence Unit (FIU) investigation that identified nearly 700,000 cases in which Upbit didn’t follow the proper Know-Your-Client (KYC) process. The Seoul Metropolitan Police also summoned a Bithumb executive on Tuesday and another Bithumb official on Wednesday for questions regarding the allegations against the lawmaker. FSC Explores Crypto Exchange Ownership Cap The investigation comes as the FSC explores imposing a cap on crypto exchange ownership. As reported by Bitcoinist, the financial authority’s chairman, Lee Eog-weon, recently revealed that the agency is reviewing a proposal to limit major shareholders’ stakes in exchanges at around 15%-20%. Lee stressed the need to limit the ownership stakes of controlling shareholders in crypto exchanges, highlighting that existing regulations mainly focus on anti-money laundering and investor protection. Nonetheless, the proposal has faced backlash from industry players and the ruling Democratic Party of Korea (DPK). According to local news outlets, a joint council representing domestic crypto exchanges, including Upbit, Bithumb, and Coinone, has opposed the cap. Exchanges warned that the proposed limit could hinder the development of South Korea’s crypto industry. It’s worth noting that if the law is enacted, major players like Dunamu’s chairman, Song Chi-hyung, and Coinone’s founder, Cha Myung-hoo, would be forced to sell a large portion of their holdings to comply with the ownership limit. Meanwhile, members of the Democratic Party also expressed their concerns, affirming that similar caps are uncommon and could make South Korea’s framework inconsistent with global regulatory trends and uninviting to investors. The exchange ownership cap proposal would be included in the upcoming Digital Asset Basic Act, also known as the Second Phase of the Virtual Asset User Protection Act, which will serve as a comprehensive framework for the entire crypto industry.