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[Editorial] Snowballing crypto scandal

Rep. Kim Nam-kuk temporarily leaves Democratic Party to avoid probe amid mounting allegations

By Korea Herald

Published : May 16, 2023 - 05:31

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Rep. Kim Nam-kuk of the main opposition Democratic Party of Korea said Sunday he would “temporarily” leave the party because he “does not want to be a burden to the party and its members at this crucial moment.”

Kim’s announcement came nine days after embarrassing revelations that he had been engaged in suspicious cryptocurrency transactions and owned around 800,000 wemix coins valued at 6 billion won ($4.4 million), even though he promoted a frugal image.

Suspicions also mounted as to how he secured the funds and a large number of crypto coins, as well as his activities as a lawmaker that critics say raise the question about conflict of interest in connection with the local gaming industry. He withdrew his wemix coins shortly before the “Travel Rule” -- a real-name transaction rule for crypto assets -- came into effect in March last year, and pushed for a revision to the income law designed to delay the taxation of crypto assets.

Notably, Kim did not issue an apology for the people in his announcement. Instead, he implied he would return later. Kim said he would fight against “unfair political attacks” and news reports based on false information. However, Kim has not fully disclosed the details of the questionable crypto transactions.

The first-term lawmaker is also under fire over allegations that he traded crypto coins while attending at least two parliamentary meetings of the National Assembly in May and November last year. If the allegations are proven true, it suggests that Kim neglected his duty as a lawmaker due to his interest in crypto trades.

Public opinion turned hostile on news reports about Kim’s massive coin holdings and other allegedly illicit activities. As a result, the Democratic Party's approval ratings among those in their 20s and 30s plummeted in a recent survey, prompting the party to launch an internal probe into Kim.

But Kim’s departure effectively neutralizes the party’s fact-finding investigation and ethics inspection concerning the crypto scandal, as the Democratic Party cannot conduct a probe into an independent lawmaker. With a changed status, Kim is now unlikely to sell off his crypto assets, a promise he had made with the party.

Kim’s decision to bolt from the party -- instead of resigning as a lawmaker -- is seen as a thinly-veiled tactic to avoid investigation. In addition, as Kim implied, he will return to the party once the scandal dies down.

Kim would not be the first in the Democratic Party to employ the tactic of leaving the party temporarily. Several members of the party have left for brief periods to seek political gains, or to soften the impact of scandals and prosecutorial investigations. It is now a well-known practice for party members who find themselves mired in corruption allegations.

Democratic Party chief Lee Jae-myung also faces public criticism, as he has remained silent about Kim’s crypto scandal. Only after public support for the party plunged did Lee order an internal investigation into Kim. In fact, Kim was in charge of launching the so-called “Lee Jae-myung Fund” during the presidential election. At the time, Kim held wemix coins, issued by game developer Wemade, and held a public forum designed to loosen regulations on play-to-earn games.

On Sunday, the Democratic Party held a forum attended by its party members and adopted an announcement that it would carry out a probe into Kim if necessary, in an apparent response to the soured public opinion.

The ruling People Power Party said Monday it will launch an internal task force to investigate Kim's crypto dealings, as well as allegations of lobbying from the gaming industry, saying the Democratic Party has no authority to conduct a probe.

With Kim denying any wrongdoing, the prosecution is required to expand its investigation into the crypto scandal and try to reveal the truth behind numerous allegations over insider trading, tax evasion, the game industry’s lobbying and political fund law violations.