Kim Nam-guk Under Prosecutors' Scrutiny for 'Tax Evasion'... Targeting Money Laundering and Concealment of Criminal Proceeds?

Cryptocurrency Tax-Exempt Until January 2025
"Possibility of Detecting Unknown Suspicious Points"

The prosecution is investigating independent lawmaker Kim Nam-guk, who has been embroiled in a cryptocurrency controversy, not only for violating the Political Funds Act but also for tax evasion and concealing criminal proceeds. It is presumed that the prosecution has judged Kim's cryptocurrency transactions as criminal acts such as money laundering, which ultimately led to tax avoidance and concealment of criminal proceeds.

A Democratic Party official is submitting a disciplinary proposal against Representative Kim Nam-guk to the National Assembly's Legislative Affairs Office on the afternoon of the 17th. Photo by Yonhap News

According to the legal community on the 18th, on the 15th and 16th, the Criminal Division 6 of the Seoul Southern District Prosecutors' Office (Chief Prosecutor Lee Joon-dong) obtained warrants and conducted raids on domestic cryptocurrency exchanges Upbit and Bithumb, as well as Kakao's blockchain affiliates. Through the consecutive raids, the prosecution appears to have secured transaction records related to Kim's cryptocurrency dealings.

The search warrants reportedly specified charges of tax evasion and concealment of criminal proceeds in addition to the previously known violation of the Political Funds Act. The Political Funds Act applies when political funds are received by a third party through means other than designated channels such as donations and contributions for political purposes. Given the current situation where it is unclear with what seed money Kim purchased cryptocurrencies like Wemix from Wemade that flowed into his cryptocurrency wallet, the prosecution has judged these as political funds.

However, the charges of tax evasion and concealment of criminal proceeds are not immediately apparent. The prosecution is also cautious about commenting on these related charges. Lawyer Yeo Ja-seon of the law firm Gwangya said, "Since cryptocurrency taxation has been deferred, avoiding income tax would not constitute tax evasion," adding, "It is analyzed that the prosecution has detected suspicious points beyond what has been publicly known so far."

Under current law, cryptocurrency gains exceeding a basic deduction of 2.5 million KRW are subject to a 22% tax rate (including local income tax) starting this year, but this has been deferred until January 1, 2025, due to the passage of the income tax law amendment last year. In other words, even if Kim made profits from cryptocurrency transactions during the period in question, he was not obligated to pay taxes. Considering this, the tax evasion charge the prosecution is contemplating appears to go beyond simply 'not paying taxes.'

According to the Tax Offenses Punishment Act, charges can be applied if taxes are avoided through fraud or dishonest means. In other words, the prosecution has judged that Kim's cryptocurrency transactions were dishonest acts that ultimately avoided tax payments. A representative example is CEO Ra Deok-yeon of SG Securities, related to the stock price crash incident. CEO Ra is accused of receiving fees under the pretense of golf practice memberships and gallery paintings to avoid taxes on profits. Additionally, the prosecution believes he evaded taxes using the so-called 'card kkang' method, which involves pretending to make credit card transactions at places like hospitals, gyms, lounge bars in Cheongdam-dong, and mala soup restaurants, but actually receiving cash.

The charge of concealing criminal proceeds is in the same context. The prosecution appears to have judged that the money was increased through dishonest means from the start and that transactions through cryptocurrency wallets constitute concealment of criminal proceeds. The criminal proceeds referred to here correspond to 'money laundering.' The prosecution received data related to Kim's cryptocurrency transactions from the Financial Intelligence Unit (FIU), which is responsible for monitoring money laundering. The FIU is known not to request investigations from law enforcement agencies solely based on a high number of transactions or large cryptocurrency holdings. According to cryptocurrency communities and the Democratic Party's fact-finding team, Kim is believed to have at least 3 to 4 cryptocurrency wallets, and there is evidence of split transfers. From January 28 to May 29 of last year, approximately 10 billion KRW worth of cryptocurrency was transferred 48 times from wallets presumed to belong to Kim to wallets at Upbit and Bithumb.

If judged as concealment of criminal proceeds, Kim's assets derived not only from cryptocurrency but also from related properties will be confiscated. Kim is known to have invested in approximately 1.37 million Wemix tokens, Mavrex issued by Netmarble, and Bora from Kakao Games at one point.

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