- Following the hack in late November, Korea-based Upbit exchange started freezing withdrawals.
- After the investigation, Koreans were allowed to withdraw their money, but foreign account holders were not.
- While many speculate about different reasons behind the move, the most likely explanation is that the exchange is waiting for permissions from the tax authority, which might take a while.
Back in December 2019, South Korean cryptocurrency exchange, Upbit, made headlines when it started preventing its foreign users from making withdrawals. Originally, many believed that this was a security measure that took place due to a hack that previously happened. However, as time passed, many started suspecting that the move may have something to do with the company’s tax fine.
Among those who have been prevented from withdrawing their funds were also 6300 Chinese crypto traders, who had their withdrawals frozen since December 2019. As mentioned, the move was made relatively soon after Upbit was hacked on November 27th, in an incident during which online criminals stole 342.000 ETH ($89.26 million according to current prices).
The hack of a major exchange gathered a lot of attention, and most people were well aware of it as December had arrived. So, when the transactions were initially frozen, many assumed that this is simply due to investigations of the hack and that they will be processed eventually.
Does the secret of frozen withdrawals lie with taxes?
However, new information indicates that the Korean crypto exchange might not have any intention of doing so. Korean users are already capable of continuing fund withdrawals, while foreigners are not. It was not long before speculation hit the forums and social networks. Some speculate that the hack was worse than it was reported, while others think that it might have something to do with a massive tax fine that another South Korean exchange, Bithumb, recently received.
In other words, some speculated that Upbit used user-owned funds to pay for its own, undisclosed tax fine and that this is why it won’t return users’ money. It should be noted that this is nothing but speculation as of yet.
Then, there is the fact that Upbit Senior Executive and his gang of accomplices were accused of fraud, and while a lot of details remain unknown, the negative publicity regarding the exchange is higher than ever.
For now, the exchange claims that it is introducing a stronger AML/KYC procedures and that those who have completed them cannot withdraw their money in Korean won. Instead. foreigners need to wait for the country’s tax authorities to decide whether they will be allowed to access their own money, which could take a lot of time.
As foreign account holders are attempting to create a proper defense, the crypto community is once again reminded not to keep their funds in the exchanges’ wallets for longer than is absolutely necessary.