South Korea’s top financial regulator is joining forces with the country’s prosecutors to widen their investigations into domestic crypto exchanges, The Korea Times reported.

The deeper efforts follow the arrest of CEO and top executives of Korean crypto exchange Coinnest last month on charges of embezzlement of customers’ funds.

South Korea, the third largest market for cryptocurrencies, banned cryptocurrency trading using anonymous accounts earlier this year. The Financial Services Commission (FSC) last year banned initial coin offerings (ICOs) in the country.

An official of the FSC recently said:

“Following a request by the Financial Supervisory Service (FSS) and the prosecution to address growing anti-money laundering compliance concerns and possible abuse of cryptocurrencies in money laundering and fraud, the FSC is looking into exchanges' corporate accounts opened in local banks.”

The FSS examines and supervises financial institutions but with the oversight of the FSC.

Officials recently raided the country’s leading crypto exchange UPbit, which is currently being investigated by police. The official hinted that Bithumb is one of the primary targets of the renewed investigations.

"The FSC is collaborating with authorities in other countries. Our latest findings show that the domestic exchange faked its balance sheets and deceived investors. The FSC is checking UPbit's computer system with prosecutors and the FSS to audit the exchange's virtual currency holdings," said another official.

According to latest reports, UPbit has claimed that an internal account audit has revealed that 100% of the coins are real.

The widening of the ongoing probe follows recent comments from the newly appointed governor of Financial Supervisory Service (FSS) Yoon Suk-heun in which he hinted on the possible easing cryptocurrency regulations in the country.