South Korean financial regulators are cracking down on unauthorized cryptocurrency funds. In particular, one crypto fund launched by a local exchange is reportedly being investigated. The exchange claims no wrongdoing as its token activities were carried out overseas, but has promptly canceled its plan to launch a second fund.
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Unauthorized Crypto Funds
South Korea’s Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have warned investors of unauthorized cryptocurrency funds. The warning followed the launch of a financial product where “cryptocurrencies collected from some investors are managed through initial coin offerings (ICO), and profits are distributed at their expiration dates,” Business Korea described.
The regulators specifically referred to the fund launched last month by crypto exchange Zeniex called “ZXG Crypto Fund No. 1,” which is “the first virtual currency fund in Korea,” the publication detailed, noting:
The virtual currency fund has never been registered with the Financial Supervisory Service … None of the management company, sales company and the trustee have been approved by the Financial Services Commission.
Maeil business newspaper reported on Tuesday that “The financial authorities have handed over the circumstantial data for the investigation to the prosecution.”
Zeniex explained that while funding was made through its platform, “the actual recruitment and token issuance were made by overseas management companies,” the news outlet conveyed. Noting that less than 1 billion won ($878,080) has been raised, the company believes that there was no reporting obligation. An official of the exchange was quoted asserting:
An indirect investment in a virtual currency fund is an attractive tool to raise market soundness … It’s unfortunate that innovative attempts will not continue until the government’s guidelines are set.
