Exchange Raided Two Days in a Row; Prosecutors Seem to Have Secured Lawmaker Kim Nam-guk's Transaction Records

Domestic Cryptocurrency Exchanges Retain Individual Transaction Records
Prosecutors Likely Confirmed Kim Nam-guk's Entire Trading Outline

The prosecution conducted raids on cryptocurrency exchanges for two consecutive days in connection with independent lawmaker Kim Nam-guk's suspected cryptocurrency investments. It is interpreted that they examined transaction records stored on the central servers of domestic cryptocurrency exchanges to prove Kim's violation of the Political Funds Act. Since domestic exchanges keep records of individuals who traded cryptocurrencies, the investigation is expected to proceed more quickly.

[Image source=Yonhap News]

According to the prosecution on the 17th, the Criminal Division 6 of the Seoul Southern District Prosecutors' Office (Chief Prosecutor Lee Joon-dong) conducted raids on domestic cryptocurrency exchanges Bithumb and Kakao the previous day. On the 15th, they had raided domestic cryptocurrency exchanges Upbit, Bithumb, Kakao's blockchain affiliates, and carried out high-intensity investigations for two consecutive days. It is reported that these entities submitted Kim's cryptocurrency transaction records and Suspicious Transaction Reports (STR) to the prosecution.

According to cryptocurrency communities and the Democratic Party's fact-finding team, Kim is known to have at least 3 to 4 cryptocurrency wallets. Between January and February last year, Kim transferred approximately 850,000 WEMIX tokens from a Bithumb wallet to an Upbit wallet. The Financial Intelligence Unit (FIU) judged this as an abnormal transaction and handed over related materials to the prosecution. The prosecution viewed Kim's abnormal transactions from October to November last year as violations of the Political Funds Act and requested search warrants for Kim's electronic wallets twice, but both were dismissed.

The reason the prosecution proceeded with the exchange raids appears to be to secure Kim's transaction records. Overseas cryptocurrency transactions are mostly recorded on the blockchain, ensuring anonymity. However, domestic cryptocurrency exchanges record transaction details on each exchange's central server rather than on the blockchain, so it is analyzed that this raid can reveal Kim's cryptocurrency transaction history. Byun Chang-ho, who runs the cryptocurrency community 'Byun Chang-ho Coin Academy,' said, "The reason transaction details can be confirmed through this raid is that domestic exchanges currently use their own ledgers to record investors' transaction histories," adding, "The prosecution likely secured transaction records made under Kim's ID."

It seems possible to grasp Kim's overall cryptocurrency transaction history beyond just the wallet records of Upbit, Bithumb, and Kakao. When cryptocurrencies are transferred from exchange wallets to anonymous personal wallets, transaction details can be confirmed through exchange records. Additionally, unlike exchange wallets, personal wallets record transaction histories on the blockchain, and blockchain records are publicly accessible. However, there are suspicions that Kim holds more than 10 wallets, which may prolong the investigation.

Experts believe that the facts regarding Kim's charges can be sufficiently determined even with this raid. This is because if cryptocurrencies traded through personal wallets previously passed through exchange wallets, a certain outline can be identified. Lawyer Yae Ja-seon of the law firm Gwangya said, "If Kim actively traded cryptocurrencies through personal wallets, it is impossible to know 100% of the transaction history," but added, "However, just the raids on Upbit, Bithumb, and Kakao provide enough clues for transaction analysis, making it possible to secure materials related to the charges."