Internal investigation into DP lawmaker's crypto begins

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Internal investigation into DP lawmaker's crypto begins

Published: 11 May. 2023, 15:03 Updated: 11 May. 2023, 15:19

Democratic Party lawmaker Kim Nam-kuk, center, is questioned by reporters about his cryptocurrency investments as he leaves the National Assembly in Yeouido, western Seoul on Tuesday afternoon. [YONHAP]

The liberal Democratic Party (DP) on Thursday convened the first meeting of an internal investigative team tasked with uncovering details of Rep. Kim Nam-kuk's ownership of 6-billion-won ($4.5 million) in cryptocurrency investments.

The team, led by the party’s secretary general, Rep. Kim Byung-kee, is expected to investigate the provenance of the funds Kim used to buy 800,000 Wemix, a cryptocurrency issued by game publisher Wemade that was once delisted.

According to local media reports, the government’s Financial Intelligence Unit first detected Kim Nam-kuk's purchases of unusually large amounts of Wemix between January and February last year, which he then completely sold off a month later.

The sale took place just days before Korea adopted a so-called “travel rule” that requires cryptocurrency platforms to retain and share information with financial regulators about the senders and recipients of cryptocurrency transfers exceeding 1 million won in value.

Kim, who is a first-term lawmaker, is under suspicion of using insider information to buy his Wemix just a month before selling it.

The fact that over 60 percent of cryptocurrency investors are people in their 20s and 30s — for whom saving for the future has become more difficult — could make the issue of Kim’s profitable investments a magnet for popular anger.

Kim had also previously asked party members for donations, claiming he was in dire financial circumstances.

When his cryptocurrency investments became public knowledge earlier this week, Kim claimed he bought the cryptocurrency with money he made from selling off LG Displays shares on Jan. 13. He said he made over 985.7 million won from the stock sales.

Kim also initially claimed that the law requiring lawmakers to disclose their personal wealth does not apply to virtual assets and that therefore his cryptocurrency dealings posed no legal problems.

In a Facebook post on Monday, Kim said he saved the seed money for his investments through frugal spending habits, which included wearing the same glasses for 20 years and not switching out the car he inherited from his father.

But he walked back on his comments and offered an apology for his actions in a subsequent Facebook post on Wednesday.

“As a public servant, I apologize for not behaving in a way expected by the people in the middle of a cost-of-living crisis,” he said, adding that he was “sorry for having caused concern.”

But the DP lawmaker also said his cryptocurrency transactions were carried out via accounts registered under his own name and denied he used insider information to buy and sell Wemix.

Kim also faces suspicions that his cryptocurrency investments pose a conflict of interest.

In July 2021, he co-sponsored a bill that would have delayed the taxation of virtual assets.

With his party’s former and current leaders mired in various criminal prosecutions, the DP appears to have little appetite for yet another scandal.

“We have recommended he sell off his cryptocurrency assets, and we believe he will comply,” senior party spokesman Kwon Chil-seung told reporters after the party’s leadership meeting Wednesday in Daegu.

The spokesman added that the party’s internal investigation of Kim’s cryptocurrency dealings could require participation from “outside experts with specialist knowledge” because “[virtual] coins are hard for ordinary people to understand.”

While Kim is currently the only DP lawmaker currently subject to an internal investigation, the party’s leadership is considering requiring all members to disclose whether they have virtual assets and the funds they used for such investments.

BY MICHAEL LEE [lee.junhyuk@joongang.co.kr]