Bitget Launches $100M Crypto Ecosystem Fund

Bithumb Live Files for BankruptcySouth Korean cryptocurrency exchange Bithumb’s live commerce platform Bithumb Live — an attempt at business diversification — has filed for bankruptcy. The platform entered bankruptcy proceedings last year, brought on by business difficulties and various suspicions of embezzlement involving its CEO.Photo by Melinda Gimpel on UnsplashAccording to legal sources on Monday, the Seoul Bankruptcy Court declared Bithumb Live’s bankruptcy last Monday. The court plans to hold creditor meetings and inspections on November 28 to incorporate creditors’ opinions into the bankruptcy proceedings and assess the status of the company. Major companies like LG Uplus, SK Telecom, SK Magic, and Lotte Card are among the platform’s creditors.Bithumb Live’s backgroundBithumb Live was founded in September 2021 by Bithumb and Bucket Studio, who each invested KRW 6 billion (approximately $4.4 million). Bucket Studio is a content distribution company that gained considerable attention with the global success of the Netflix original series “Squid Game” last year because it holds a 15% stake in Artist Company, an entertainment planning agency co-founded by “Squid Game” lead actor Lee Jung-jae and actor Jung Woo-sung. In particular, Bucket Studio’s CEO Kang Ji-yeon is the sister of Kang Jong-hyun, who is embroiled in allegations related to the ownership of Bithumb.Bithumb and Bucket Studio each hold a 37.5% share of Bithumb Live, making a combined ownership of over 75%. Bithumb Live, led by Kang Ji-yeon, had been established with the intent to create a commerce platform with various features like a metaverse, non-fungible tokens (NFTs), and cryptocurrency payments. After its establishment, it announced that it would challenge its key competitor Naver’s prominent live shopping platform by preparing to sign deals with 15 different companies.Financial hardshipsHowever, the platform hit a roadblock just one year after its establishment and found itself unable to escape financial difficulties. According to last year’s business report, Bithumb Live’s liabilities exceeded its assets by approximately KRW 248 million and the platform recorded a net loss of KRW 10.2 billion. Unable to withstand such losses, it announced an indefinite temporary closure via its internal messenger to employees in October of last year. The employees ended up working only four hours a day, resulting in a more than 50% reduction in working hours. Subsequently, the number of employees, which was 73 in September, plummeted to just four in January of this year, essentially signaling a total stop to business operations. In the first half of this year, Bithumb Live’s net loss amounted to almost KRW 1.1 billion.Management entanglementsOn top of these financial strains, the company was also plagued by Kang Ji-yeon and her brother Kang Jong-hyun’s owner’s risk, which encompassed allegations of embezzlement and misappropriation. In July of this year, Kang Ji-yeon was sent to trial on charges of embezzlement and misappropriation at Bucket Studio. Along with her brother and former Chorokbaem (CRB) Group Chairman Won Young-sik, she was accused of granting call options on convertible bonds held by Bithumb affiliates Vidente and Bucket Studio for free to companies controlled by Won’s children between December 2021 and July 2022, inciting damages worth approximately KRW 58.7 billion to the respective companies. In the process, she was also found to have received KRW 32.2 billion in acquisition payments. Kang Jong-hyun had been detained and on trial since February of this year.Bithumb Live’s largest shareholder, Bucket Studio, is also in a tight spot. Back in June, the Korea Exchange imposed a penalty of three points on Bucket Studio for reversing its disclosure. The company had been penalized five points the previous month after withdrawing its decision to issue convertible bonds. In particular, the studio also recorded an operating loss of KRW 7 billion and a net loss of KRW 195.6 billion last year based on consolidated financial statements. In the first half of this year alone, it suffered an operating loss of KRW 896 million, raising red flags for its management.

Zettai Pte Ltd., the Singapore-based holding company that controls Indian crypto exchange WazirX through its subsidiary Zanmai India, has filed an application for a moratorium with the Singaporean High Court, under section 64 of the Insolvency, Restructuring and Dissolution Act 2018. Six months requestedIn the filing (HC/OA 861/2024), the company has pleaded with the court to be granted a six-month moratorium, which would give the firm the space and time needed to restructure its liabilities. The company laid out details of its moratorium application in a blog post published to its website on August 28. The firm outlined that a moratorium represents “ the most efficient way to address users’ cryptocurrency balances on the Platform and facilitate recovery for users.” An automatic moratorium of 30 days has effectively been granted as a consequence of the application itself, and it is up to the court if it approves the six-month moratorium that is being sought. A date for the hearing of that matter has yet to be scheduled.Photo by Palu Malerba on Pexels$234 million hack falloutWazirX has been dealing with the fallout from a $234 million hack which occurred in July. One key entity that is owed funds is Indian crypto app CoinSwitch. In an effort to get its funds back, the company has sued WazirX. Taking to the X social media platform, CoinSwitch outlined why it felt the need to take legal action. It stated: "From the day of the incident, we have tried to be in constant touch with the WazirX team, seeking recovery of the funds that are stuck on their exchange. However, our efforts have not come to fruition." In a follow-up tweet, CoinSwitch assured its own users that its exposure to WazirX has no impact on user balances. The company has WazirX exposure that amounts to 2% of its overall user funds. That exposure is reduced further if WazirX’ claim that only ERC-20 tokens were affected is taken on board, accounting for 1% of CoinSwitch user deposits. White KnightWazirX co-founder Nischal Shetty spoke to the notion of a “white knight” in an affidavit submitted under the Zettai name to support the application. He outlined that WazirX is in talks with 11 crypto exchanges and has signed three non-disclosure agreements (NDAs). The company has also received offers for financing and for partnering with Zettai, the WazirX parent company. WazirX has outlined that it has set aside $12 million in digital assets to cover legal and associated costs that the company anticipates incurring as part of its restructuring efforts. Matters are further compounded by the fact that a cloud hangs over the ownership of the company. Shetty has claimed that he is no longer an owner of the exchange. In 2022, he wrote that Binance had acquired WazirX. Around the same time frame, Binance’s Changpeng Zhao (CZ) outlined that Binance didn’t control WazirX systems.  India’s economic intelligence agency, the Enforcement Directorate, has claimed in the past that Shetty has gone out of his way to obscure the ownership structure by way of a complex chain of companies in Singapore.

NFTs not subject to South Korea’s Virtual Asset User Protection ActIn anticipation of the Virtual Asset User Protection Act coming into effect in July of next year, the South Korean Financial Services Commission (FSC) has issued an advance notice regarding its subordinate statutes.Photo by Ethan Brooke on UnsplashSeven specific provisionsThe subsidiary regulations under the Act detail seven specific provisions aligned with the Act’s objectives. Firstly, assets categorized as electronic securities, mobile vouchers, deposit tokens backed by the Bank of Korea’s central bank digital currencies (CBDCs) and non-fungible tokens (NFTs) will not be classified as virtual assets and hence, not regulated by this Act. However, in instances where NFTs are used as a means of payment for specific goods or services, they will be regarded as virtual assets.Secondly, banks will take responsibility for managing the deposits of users on cryptocurrency exchanges. This aligns with the Act’s requirement for virtual asset service providers (VASPs) to keep users’ funds separate from their own, either by depositing them in, or entrusting them to, reputable institutions. Under these regulations, banks are required to manage users’ assets in a manner consistent with how investors’ deposits are handled under the Capital Markets Act. This means that banks are allowed to invest VASP users’ assets only in secure instruments, such as state and local government bonds, and are also obligated to pay fees to deposit owners, taking into account the yields of these investments.80% of user assets in cold walletsThe third key aspect of the regulations is that VASPs are required to store a minimum of 80% of user assets in cold wallets, which are not connected to the internet. This is higher than the current requirement of 70%, enhancing the security measures for users of virtual assets. To calculate the total value of a virtual asset at any given time, its total supply is multiplied by its average daily price over the past year. VASPs are obligated to assess the value of virtual assets every month.The fourth regulation mandates that VASPs must enroll in an insurance plan, contribute to a rainy day fund or accumulate reserves. This is to ensure they can fulfill their compensation responsibilities in the event of incidents like security breaches or technical failures. The required preparation amount is set at a minimum of 5% of the user assets stored in hot wallets, as these are more susceptible to risks. VASPs are required to update their compensation thresholds or reserves monthly and must take any necessary actions to comply with these requirements by the next working day following the update.Information disclosure guidelinesAnother regulation addresses the issue of insider trading in the context of the virtual asset market. Under the current Capital Markets Act, information is considered disclosed when it’s made available through disclosure systems of the FSC or the Korea Exchange (KRX). However, since the cryptocurrency market lacks a similar system, the new statute provides criteria for determining when information is deemed disclosed.For instance, if a VASP, including exchanges, releases crucial information about a virtual asset on an exchange and six hours pass, that information is regarded as disclosed. This acknowledges the non-stop nature of the crypto market. Moreover, information disclosed post 6 p.m. is treated as officially disclosed after 9 a.m. the next day.Additionally, if a virtual asset issuer publishes significant information about its token on a website hosting its white paper, the information is deemed public after one day. This is conditional upon the website being publicly accessible and having consistently provided important token information for the preceding six months.These rules aim to provide clarity and fairness in information disclosure in the crypto market, adapting the principles of traditional financial markets to the unique dynamics of virtual assets.No arbitrary suspension of transactionsThe sixth regulation restricts VASPs from arbitrarily halting deposits and withdrawals of virtual assets unless there are justifiable reasons for such actions. Acceptable circumstances for suspending these transactions include situations where the VASP experiences a technical disruption in its system, where regulatory authorities instruct a VASP to cease deposits and withdrawals or where cyberattacks or similar incidents have occurred or are clearly imminent.Lastly, virtual asset exchanges are required to monitor for abnormal transactions continuously. These are transactions that show substantial shifts in the prices or trading volumes of virtual assets, particularly in response to news or rumors that could influence cryptocurrency prices. If VASPs suspect unfair trading practices, they must report to the FSC or the Financial Supervisory Service (FSS). When there is ample evidence of such activities, crypto exchanges are obligated to notify the police or the prosecutors’ office. In addition, the financial regulator has the authority to levy fines based on the prosecution’s decisions or after completing consultations with the prosecution if a year has passed since the day of the report.During the period of advance notice, which spans from Nov. 11 to Jan. 22, the FSC will seek comments from relevant organizations, experts and businesses. This process is aimed at refining the rules and regulations subordinate to the Virtual Asset User Protection Act. Moving forward, the financial authorities plan to publish a set of guidelines and Q&A materials and conduct explanatory sessions, with the goal of ensuring a smooth implementation of the Act.