SEOUL—Prosecutors last month raided three cryptocurrency exchanges in South Korea’s capital, after a January government investigation revealed that a portion of customers’ assets had been transferred to private bank accounts belonging to top managers at the exchanges.
They carried out the three-day raid and confiscated items including computer hard disks, financial transaction records, mobile phones and accounting records,
the case’s head prosecutor, said Friday. The raid comes as the government continues to grapple with how to regulate virtual currencies in one of the world’s most frenetic crypto markets.
“It’s unclear yet whether the transactions can be seen as embezzlement,” Mr. Jeong said. He didn’t disclose the total amount of the transferred funds, or specify which exchanges were under investigation. One, he added, is located in the Seoul neighborhood of Yeouido, home to Coinone, one of the country’s largest cryptocurrency exchanges.
Investigations have since the raid found that customers’ assets were used by at least one of the exchanges to purchase bitcoin from competitors.
The Korea Blockchain Association, an industry group involving over 30 local exchanges, didn’t respond to requests for comment on the raid.
The South Korean won was last year’s fourth most-used currency in bitcoin trading after the U.S. dollar, the Japanese yen and the euro, according to CryptoCompare. It was the second most-used for trading some alternative cryptocurrencies including ether and Bitcoin Cash, a rival to bitcoin.
The country’s crypto craze has made it an attractive market for foreign digital currency exchanges. In January, China’s cryptocurrency platform OKCoin said it would open an exchange in South Korea. A spokesman at OKCoin said it plans to begin service this month.
But as exchanges look to expand their operations, regulators in South Korea—and other crypto hubs like the U.S. and Japan—are stepping up their efforts to tighten regulations. Bitcoin’s price has since tumbled.
Seoul has since late 2017 announced measures to calm investors’ fervor and stop anonymous crypto trading.
In Japan—considered to have one of the loosest regulatory landscapes on virtual currency—financial regulators this month shut down two cryptocurrency exchanges, citing weak procedures to protect customers’ assets.
Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com