South Korean government officials have reportedly been caught insider trading. They sold all of their cryptocurrency holdings and profited just before the regulators announced crypto regulatory measures. The country’s Financial Supervisory Service is investigating the case.
A Case of Government Insider Trading
At a meeting of the National Assembly’s Committee on Thursday, January 18, the Financial Supervisory Service (FSS) confirmed that some employees invested in cryptocurrencies and sold them just before the government announced crypto regulatory measures, local media reported.
A right-wing party lawmaker said at the meeting, as reported by Joongang Ilbo:
There is intelligence that FSS staff sold all of the virtual currency that they invested in just prior to the announcement of the government’s measures.
“We have confirmed the intelligence,” FSS Governor Choi Heung-sik admitted. “We have confirmed that some public officials have done such an act,” Chief of the Office of the Prime Minister, Hong Nam-ki, added. The news outlet noted that the lawmakers called for “thorough investigation and punishment,” and quoted them emphasizing:
It is a tremendous thing for civil servants to influence the market and gain profits.
Chosun elaborated, “It is expected that the moral hazard controversy will spread if the government uses the inside information and profits from virtual currency transactions while the financial authorities publish a hard-line policy saying that ‘the cryptocurrency transaction is gambling’.”
FSS Crypto Policies
The Korean Public Service Ethics Act “strictly restricts the stock trading of public officials in order to prevent misuse of internal information,” Chosun pointed out. However, since cryptocurrency is currently not defined as a financial asset or currency, “there is no code of ethics and no code of conduct for virtual money investment in the FSS regulations.” However, “the misuse of internal information could lead to punishment,” the publication added.
Recently, the FSS advised its employees to refrain from trading cryptocurrencies, stating that “If the supervisory officials engage in speculative transactions, it will be difficult for the public to understand ethically,” Chosun also reported.
On Tuesday, the FSS announced that it has created a Virtual Currency Task Force which has two divisions: a “virtual currency counterpart” and a “virtual currency checkpoint,” Asia Today explained. The former is dedicated to cryptocurrency-related tasks while the latter is a consultation body of crypto-related inspections and supervisions.
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