South Korea’s Financial Supervisory Service (FSS) has acknowledged allegations of insider trading by staff, and has launched an investigation.
According to the Korea Times, FSS governor Cho Heung-sik has said that the allegations concern a single staff member who is accused of selling crypto-assets based on information they had about the governments upcoming regulations on the crypto-market.
Choi also confirmed that the regulator would make the findings of the investigations public. The comments were made at a meeting of the National Assembly’s Committee on 18 January. Local news agency Joongang Ilbo qoutes a lawmaker as saying:
“There is intelligence that FSS staff sold the virtual currency that they invested in just prior to the announcement of the government’s measures.”
Choi is also quoted as saying that, if found guilty, the officials will face thorough punishment:
“It is a tremendous thing for civil servants to influence the market and gain profits.”
Like many other countries, restrictions on insider trading are built into South Korea’s legal infrastructures. The Korean Public Service Ethics Act features sections banning the “stock trading of public officials in order to prevent misuse of internal information”.
Cryptocurrencies are not, however, currently defined as a financial asset or currency in the country’s regulatory framework. This puts the matter firmly into the grey areas, as the FSS official may not have violated any code of ethics relating to virtual currencies, other than the misuse of internal information.
The FSS did recently issue advice to its employees that they should trade cryptocurrencies as it would be “difficult for the public to understand ethically”.