Bithumb faces ‘heavy disciplinary action’ after violating money laundering rules

Financial regulators have told the South Korean crypto exchange Bithumb to brace for “heavy disciplinary action” after it violated anti-money-laundering protocols.

The Financial Intelligence Unit, the branch of the Financial Services Commission that monitors domestic exchanges, told Bithumb incoming sanctions could include “a six-month partial suspension of operations,” unnamed sources told South Korean newspaper Seoul Shinmun.

“Restrictions on our cryptocurrency services will only apply to new customers,” a Bithumb spokesperson told the newspaper.

“Existing users will be able to continue carrying out transactions — including deposits and withdrawals — as normal.”

The sanctions will come as a fresh blow to Bithumb, which is still reeling from an embarrassing gaffe in which its staff accidentally gave away $40 billion worth of Bitcoin.

Bithumb is also the subject of a probe from advertising watchdogs who are concerned about claims Bithumb made in its marketing campaigns.

Regulators prepare sanctions

The FIU conducted an inspection at Bithumb last year and found evidence that the exchange had allowed customers to send crypto to unregistered overseas crypto trading platforms.

Officers also found Bithumb staff had failed to adhere to know-your-customer protocols.

Inspectors said they uncovered scores of violations at all of Bithumb’s permit-holding rivals.

The FIU will officially unveil its decision when it convenes a sanctions review committee. This committee could meet before the end of the month, the sources said.

The exchanges GOPAX and Coinone are also reportedly awaiting news of their fates.

The FIU imposed a similar three-month freeze on new customer regulations on Bithumb’s closest rival, Upbit, early last year after uncovering money-laundering violations during an on-site inspection.

Upbit has filed a legal challenge to halt the suspension order. A panel of judges is set to rule on the case in April, South Korean newspaper Maeil Kyungjae reported.

Executives face punishment

The FIU is also expected to take disciplinary actions against senior Bithumb executives, the sources told Seoul Shinmun.

The Bithumb spokesperson insisted that the FIU has yet to come to a final decision on sanctions.

“We are still at the preliminary notification stage,” the Bithumb spokesperson said.

“The FIU is still gathering opinions on administrative procedures. We plan to fully explain our past shortcomings and the efforts we are making to improve in the future.”

Bithumb’s 24-hour trading volume is up 8% and currently stands at $505 million, per CoinGecko data.

Tim Alper is a News Correspondent at DL News. Got a tip? Email him at tdalper@dlnews.com.