South Korean Crypto Exchange Declares Bankruptcy Citing Embezzlement
South Korean cryptocurrency exchange Coinbin has declared bankruptcy after suffering millions of dollars in losses, in part due to claimed embezzlement.
Coinbin published a notice on its website on Wednesday, stating that “increased debt” and “government regulation” led to the firm having to halt its business operations. Specifically, it said regulators’ suspension of its ability to issue virtual accounts to users was part of the cause, as well as increased operating expenses and liabilities from its collapsed subsidiary exchange Youbit.
A report from Business Korea on Friday indicated that Coinbin suffered estimated losses of 29.3 billion won (or $26 million).
According to the notice, Coinbin halted all crypto and cash withdrawals at 3:00 pm on Wednesday, and asked users to not deposit any more funds in their accounts. “The settlement of cash and [cryptocurrencies] will be carried out by all bankruptcy procedures,” it added.
The exchange further cited “corporate executive moral hazard” as one of the reasons for its bankruptcy. It explained that an executive from Youbit had “lost” paper wallets containing “hundreds” of cryptocurrency private keys last November. The notice said the company is making efforts to recover the funds and that it will make “civil and criminal complaints” against the executive.
Coinbin acquired crypto exchange Youbit in 2017, according to Business Korea. Coinbin CEO Park Chan-kyu told the news source that Youbit’s former CEO had “committed dereliction of duty and embezzled company funds.”
Back in December, Youbit announced it was declaring bankruptcy following a second hack of its platform. The exchange said at the time that it had lost around 17 percent of its total assets in the breach. Compounding its problems, its insurer refused to pay out to cover its losses.
Youbit, previously known as Yapizon, suffered its first hack last April – one South Korean officials believed was conducted with the support of neighboring North Korea.
Last month, South Korea’s Ministry of Science and ICT, the Korea Internet & Security Agency and the Ministry of Economy and Finance reported that they had inspected 21 crypto exchanges and only a third passed a security audit.
Seoul image via Shutterstock