South Korea Investigates OKX Crypto Exchange Over Alleged Unregistered Operations

Jimmy Aki
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South Korea’s financial authorities have initiated an investigation into the crypto exchange OKX for potential illegal operations within the country. The probe comes after allegations surfaced that OKX had been promoting its services to South Korean users without registration.

OKX Used Telegram Influencers to Promote “Jumpstart” Token

On February 7, local media reported that OKX has come under the regulatory scrutiny of the South Korean regulators. This includes the Digital Asset Exchange Association (DAXA) and the Financial Intelligence Unit (FIU)

This development emerged after DAXA alerted the FIU regarding illicit activities by OKX, prompting regulatory scrutiny of the exchange’s operations.

OKX, formerly OKEx, allegedly targeted South Korean investors through its ‘Jumpstart’ token sales platform, conducting all trading operations without required registration procedures.

Despite lacking a Korean-language website, OKX allegedly utilized South Korean influencers on Telegram to promote its offerings. This raised concerns about its lack of compliance with regulatory requirements for crypto exchanges in the country.

In tackling this, DAXA and FIU jointly initiated the investigation probe on December 4, 2023.

Both regulators urged residents to report unlicensed exchanges, highlighting the authorities’ proactive stance on maintaining regulatory compliance in crypto.

Meanwhile, South Korean legislation mandates that crypto exchanges obtain registration before offering services to citizens. Failure to do so may result in severe penalties from the financial regulatory bodies.

In light of this, South Korea’s Financial Services Commission announced penalties on February 7 for crypto law violators. The penalties include potential life imprisonment for those accruing illegal profits exceeding $3.8 million.

The regulatory landscape emphasized the government’s commitment to ensuring the integrity and security of the crypto market.

Subsequently, DAXA and the FIU will assess the extent of OKX’s alleged violations of regulatory standards, followed by potential litigations.

Deep Dive on South Korea’s DAXA & FIU Stringent Operations

South Korea’s Special Financial Information Act has mandated thorough reporting by virtual asset business operators.

However, some operators flout these regulations and engage in market manipulations, prompting intervention from DAXA.

DAXA, armed with a user-friendly reporting system, aims to crack down on non-compliant operators. Therefore, reports submitted to DAXA must detail business information, evidence of unreported activities, and reasons for suspicion.

Upon receiving reports, DAXA will conduct an initial review and forward findings to the FIU. The FIU plays a crucial role in assessing reported cases and determining the status of virtual asset businesses.

If the unauthorized operation is confirmed, the FIU notifies the business operator and enforces measures, often collaborating with investigative agencies.

The partnership between DAXA and the FIU signifies a milestone in ensuring the safety of Korean citizens.

By addressing undeclared virtual asset businesses, they aim to foster a robust and responsible virtual asset ecosystem.

OKX Set to Move Past $6.5 Billion Market Cap Swipe

Before the latest scrutiny by South Korea’s regulators, OKX recently experienced a brief crash of OKB, its native utility token.

On January 23rd, OKB’s value plummeted from $46.80 to $25.10 in under fifteen minutes, marking a staggering 48% decline.

OKX
Source: CoinMarketCap Market Data

This sharp drop resulted in a significant loss of $6.5 billion in diluted market capitalization.

Nevertheless, OKX attributed the sudden decline to selling sizable leverage holdings and exacerbating market forces. These pressures triggered leverage trades, cross-currency transactions, and the liquidation of pledged debts, further driving down the token’s value.

Despite the tumultuous fall, the token exhibited resilience, swiftly rebounding and reaching $48.39 at the time of writing. OKX pledged to compensate affected users to address the aftermath of the flash collapse.

According to the CoinMarketCap live update, the exchange utility token has recovered and trades at $48.59 per token.

OKX’s decision to offer compensation recognizes the importance of safeguarding users in the face of inherent sector risks and volatility.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.