Rep. Kim Nam-kuk of the Democratic Party of Korea is now at the center of an intensifying political conflict over his cryptocurrency transactions. The focus is on whether his holdings and disposal of crypto assets violated laws or regulations.
With the investigation still underway, there is no way at this point to conclude that any illegal acts were committed by Kim. Regardless of the result of the probe, however, the implications of the case are likely to be far-reaching, especially in connection with the disclosure rules of public officials.
According to reports by local media, Kim held around 800,000 Wemix coins -- crypto assets operated by online game firm Wemade -- valued at up to 6 billion won ($4.5 million) in early 2022. Kim transferred Wemix coins to his crypto account between January and February 2022, and all his holdings were suddenly withdrawn from late February through early March of the same year.
Kim’s holdings and transactions alone may sound benign. After all, lawmakers are free to engage in financial investments, including the purchase and sales of crypto assets. But Kim’s past activities and the timing of his crypto transactions are now raising serious questions.
First, under the current disclosure rule for public officials, Kim reported that his total assets amounted to 1.18 billion won in 2020, 1.26 billion won in 2021 and 1.53 billion won in 2022. Kim claimed he did not report the crypto assets as it was not required in the disclosure rule.
Lawmakers from the ruling People Power Party as well as Kim's critics, however, question how he secured the money to buy a large number of Wemix coins despite his reported assets.
Another doubt being raised is that the massive withdrawal of Wemix coins by Kim was made right before the so-called “Travel Rule” -- a real-name transaction rule for crypto assets -- came into effect on March 25, 2022.
Along with the suspicious timing of his disposal of coins, Kim faces criticism that he was one of the lawmakers who had proposed a revision to the income law aimed at delaying the taxation of crypto assets for one year to January 2023.
Taxation experts say that a lawmaker engaged in large-scale coin transactions should be criticized for conflict of interest if he joins a revision proposal to put off taxation on crypto holdings.
The ruling party is now ratcheting up its attacks of Kim over the coin transactions as well as his questionable involvement in the revision bill to delay taxation of crypto holdings.
The Seoul Southern District Prosecutors’ Office is currently investigating Kim’s case to see if there were any illegal acts committed. The prosecution received Kim’s transaction records from the Korea Financial Intelligence Unit, an agency under the Financial Services Commission. The prosecution sought a court order to track Kim’s financial accounts, but it was rejected by the court. Nonetheless, the prosecution has persisted in his probe of Kim.
Denying any wrongdoing, Kim slammed the prosecution and the ruling party, arguing that all his transactions were lawful and that the extended probe has been going overboard without clear evidence.
Despite his claim that all transactions were legal, Kim has not provided details about how he managed to amass the funds to purchase the coins and how he came to own them.
There are plenty of questions about Kim’s coin holdings, but it is the prosecution that should reveal what really happened and discover any wrongdoing. What matters now is that, as Kim’s case demonstrates, public officials must be required to disclose their crypto assets.
There are over 6 million crypto investors in South Korea, with the value of the daily coin trade estimated at around 3 trillion won. The National Assembly and the government should conduct a fact-finding survey and fix the loophole in the disclosure rule by making it mandatory for public officials to reveal their crypto holdings in their asset reports.