Kim Nam-guk Reveals 'Unexpected Account'... What Are the Key Issues in 'Coin Investment'?

Controversies Over Presidential Election Fund Use and Conflicts of Interest
Questions Remain Despite Direct Clarifications on Purchase History
Calls to Include in 'Asset Disclosure' Target

Democratic Party lawmaker Kim Nam-guk's '6 billion won coin investment suspicion' is heating up the political sphere. It has come to light that Kim withdrew a large amount of virtual assets in full ahead of last year's presidential election, raising the key issue of whether the funds were used as illegal political funds. Additionally, there is controversy over whether the virtual assets Kim invested in are subject to public officials' asset disclosure. Furthermore, questions of potential conflicts of interest have been raised as he participated in a bill that postpones taxation on virtual assets he invested in.

According to the political circles and Kim's explanation on the 10th, Kim's coin investment dates back to January 2021. At that time, Kim used 985.74 million won from the full sale of LG Display stocks as initial investment capital for virtual assets. He appeared on the YouTube program 'Kim Eo-jun's News Factory' the day before and said, "The jeonse (long-term deposit) lease expired, so I invested 600 million won of the jeonse deposit to buy LG Display (stocks)," adding, "I used it as initial capital for cryptocurrency investment." He explained that amid the liquidity unleashed by the COVID-19 pandemic that boosted the stock market, he pulled together the 600 million won jeonse deposit to invest in stocks, earning nearly 400 million won in profit, which he then used as seed money for virtual asset investment.

However, looking at the stock investment and virtual asset transaction account details disclosed by Kim on the 8th, from February 9 to 12, 2021, Kim transferred 986.28 million won from Kiwoom Securities, where the LG Display sale proceeds were deposited, to Kookmin Bank, and then moved it again to K Bank. K Bank, where the LG Display sale proceeds were deposited, is the dedicated account of Upbit, the top virtual asset exchange in Korea.

Initially, it was reported that Kim made a profit of about 6 billion won by investing in WEMIX coins issued by the KOSDAQ-listed game company Wemade, and WEMIX was listed on Upbit in January last year. This means that at the time Kim sold LG Display stocks, it was impossible to purchase WEMIX on Upbit. WEMIX was listed on Bithumb, a virtual asset exchange with NongHyup Bank as its dedicated account, around October 2020, not K Bank.

Kim disclosed transaction details with Kiwoom Securities and Kookmin Bank, as well as between Kookmin Bank and K Bank, but did not disclose the NongHyup Bank account, which is the main bank of Bithumb, where he currently holds WEMIX.

①Why did Kim Nam-guk sell coins ahead of the presidential election?

[Image source=Yonhap News]

The key issue is that Kim withdrew a large amount of coins just before last year's presidential election (March 9, 2022) and the implementation of the virtual currency real-name transaction system (Travel Rule) on March 25, 2022. There is speculation that he sold virtual assets worth 6 billion won ahead of the election to use as election funds or deliberately disposed of them all before the real-name system was implemented. However, Kim completely denied the allegations in a statement on the 8th.

Regarding the possibility of using the funds for the election, he said, "Only 4.4 million won in cash was withdrawn from all accounts during the election period," and "The virtual currency transferred in mid-February 2022 was not withdrawn and converted into cash. It was only moved to another real-name wallet under my name." He also refuted the transfer process between exchanges, saying, "I only traded with accounts verified under real names, and I only transacted with my own wallet address verified under my real name, without transferring to or receiving from others."

②Where did the 900 million won deposit come from?

Kim stated in his explanation that he used about 1 billion won from stock sales as initial coin investment capital, but the whereabouts of about 900 million won in deposits, which increased between 2021 and 2022 according to his asset declaration (from 147.69 million won to 1.11581 billion won), have not been explained.

Regarding this, Jang Ye-chan, the youth supreme council member of the People Power Party, wrote on Facebook on the 8th, "Kim's explanation that he invested 900 million won from LG Display stock sale proceeds into cryptocurrency is self-defeating," and criticized, "The 900 million won from stock sales is fully reflected in the deposit in the asset declaration. Then where did the 900 million won invested in cryptocurrency suddenly come from? I'm very curious about the secret of making 900 million won appear out of nowhere."

There was also criticism that the specific timing, amount, and total cash-out amount of buying and selling WEMIX coins were not disclosed in the explanation statement. In fact, the transaction details Kim disclosed show transfers of 300 million won on February 9, 200 million won on the 11th, and 500 million won on the 12th to banks and virtual currency exchanges, but no record of actual WEMIX coin purchases was revealed.

③Participation in tax deferral bill while investing in coins?

Controversy over a potential conflict of interest has also been raised because Kim co-sponsored the 'Income Tax Act Amendment' (led by lawmaker Roh Woong-rae) that defers taxation on virtual asset income while holding virtual assets worth hundreds of millions of won. This bill was proposed in July 2021 and passed the plenary session in December of the same year. As a result, taxation on virtual assets, which was supposed to be applied from January last year, was postponed to January this year, leading to criticism that Kim also benefited from the tax deferral.

The current Public Officials Conflict of Interest Prevention Act stipulates that "if a public official judges that it is difficult to perform duties fairly and honestly due to private interests, they must avoid performing duties to prevent conflicts of interest." The Anti-Corruption and Civil Rights Commission is reportedly reviewing whether Kim's participation in the related bill constitutes a violation of the Conflict of Interest Prevention Act.

As this controversy erupted, voices have emerged calling for restrictions on holding and investing in virtual assets above a certain amount, similar to the 'stock blind trust system.' The Citizens' Coalition for Economic Justice issued a statement on the 8th saying, "Because virtual currencies guarantee anonymity, they are more likely to be used by politicians for illegal wealth accumulation and concealment, so monitoring and regulation are necessary," and added, "Legislation to prohibit holding virtual currencies above a certain amount, like the stock blind trust system, should also be considered."

④What is the problem with lawmakers investing in coins?

On the 27th, the partial amendment bill of the Local Tax Basic Act was passed at the plenary session held at the National Assembly. Photo by Hyunmin Kim kimhyun81@

In political circles, criticism has arisen that elected public officials holding and trading large amounts of virtual assets violate public officials' ethics. Lee Sang-min, a Democratic Party lawmaker, said on YTN Radio's 'Shin Yul's News Face-off' the day before, "They boast about doing well in financial investment by investing in stocks or coins, but this is not the right attitude as a public official," adding, "Whether running a business or a startup, doing a side job as a lawmaker is actually something that should not be done."

Daegu Mayor Hong Joon-pyo said on Facebook the same day, "The fact that a young politician held 6 billion won worth of virtual currency of unknown origin means he is a money speculator, not a young politician anymore," and added, "How disappointed the youth of Korea must have been. It will be difficult to escape with shallow tricks."

This controversy has also raised the need for virtual asset disclosure. Kim declared assets worth 1.53 billion won this year, but virtual assets worth tens of billions of won are excluded from the declared assets. In the 21st National Assembly, a total of five bills, including the 'Public Officials Ethics Act Partial Amendment Bill' led by Democratic Party lawmaker Min Hyung-bae in November 2020, have been proposed.

This content was produced with the assistance of AI translation services.