Rumors of complete investigations and search and seizure by South Korean prosecutors on South Korean ICO (Initial Coin Offering) industry are beginning to spread. Many top ICO and cryptocurrency companies are mentioned as targets of investigations one after the other. Some companies have either established their own task forces or have begun to hire accountants or lawyers in case for legal actions that they may have to take in the future.
South Korean ICO industry, which was hoping for some light in the tunnel when National Assembly recently made a suggestion to allow ICO is once again looking to protect itself.
According to industries, rumors about Supreme Prosecutors’ Office (SPO)’s Financial Investigation Department 2 (Chief Prosecutor Jung Dae-jung) requesting accounting information from companies that had carried out ICOs in foreign countries and companies that had done ICO tasks for other companies have begun to spread since last month. SPO’s Financial Investigation Department 2 is the department that is responsible for incidents related to cryptocurrency and recently carried out a search and seizure measure on Upbit and arrested CEO Kim Ik-hwan of Coinnest.
Some media accepted these rumors to be factual and even mentioned names of major ICO companies such as ones that carried out ICO process before South Korean Government prohibited ICO, ones that established corporates in foreign countries and raised tens of millions of dollars by carrying out ICO process through those corporates, and companies that acted as agency businesses for foreign ICOs. Some also predicted that South Korean prosecutors will begin to summon companies on full-scale after local elections are finished.
“Although we are taking appropriate measures with these rumors spreading, we have yet to receive any call from prosecutors.” said a representative for a company that carried out an ICO process in a foreign country. “We are extremely worried as we do not know why some companies are under investigations.”
Other ICO companies are in a similar situation as they are limiting their marketing and advertisements and are busy with preparing measures such as looking into legal principles. Although level of attention and interests affects ICOs, they are concerned with taking huge blows for not being careful.
“Although there is not any legal problem after discussing with our internal legal team, many voiced their opinions towards adjusting major schedules for a time being.” said a representative for an ICO agency business. “We predict that South Korean prosecutors will start to summon ICO companies on full-scale once local elections are finished.”
It is heard that South Korean prosecutors are looking into whether ICO companies violated any law during an ICO process and whether they raised funds properly as reckless ICOs are becoming problems as there have been ICO companies that have raised tens of millions of dollars.
Some receive investments with ungrounded white papers that are not properly verified and some misuse funds that they have raised for personal spending. Number of pyramid and fraudulent companies that just put out the word ‘ICO’ is also on a rise. It is heard that SPO’s Financial Investigation Department received many accusations towards fraudulent companies.
However, it is still not confirmed whether a company received investigations or search and seizure measure by South Korean prosecutors. A report that a CEO of an ICO company was arrested is also groundless.
“I was confused when there were groundless rumors after I came back from a business trip.” said a CEO of a company who was mentioned as a target of an investigation. “When I visited a bank to see whether authorities looked into my accounts just in case, I did not see anything.”
There are also rumors that a company received search and seizure measure by prosecutors at the end of May and that it hired a law firm. However, a law firm that was mentioned said that it did not sign anything with this particular company.
Every person of interest and company that were mentioned are all denying reports that are circulating around them. Regarding this issue, SPO announced that it cannot disclose any information whether anything is true.
Staff Reporter Park, Jungeun | jepark@etnews.com & Staff Reporter Gil, Jaeshik | osolgil@etnews.com