Officials at Top Korean Cryptocurrency Exchange Upbit Indicted for Fraud

Officials at South Korea’s largest cryptocurrency exchange, Upbit, have been indicted for fraud. They allegedly made bogus crypto orders worth approximately $226 billion and sold 11,550 BTC to around 26,000 investors. Upbit has denied the charges and insisted that it did not commit fraud, engage in wash trades, or trade cryptocurrencies it did not own.

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Officials Indicted

Three officials at South Korea’s largest cryptocurrency exchange, Upbit, have been “indicted for offering fraudulent transactions and swindling money from investors,” Yonhap reported Friday.

According to the Southern Seoul District Prosecutors’ Office, a board chairman, a financial director and a working-level official of the exchange “allegedly opened a fake account around September last year,” the news outlet conveyed. The prosecutors said the officials “made bogus orders worth 254 trillion won (US$226.2 billion) over a period of about two months to inflate the currency transactions and lure more customers,” the publication detailed, adding:

While rigging transactions, they actually sold 11,550 bitcoins to around 26,000 customers and pocketed 150 billion won.

Upbit is currently the largest cryptocurrency exchange in the country, with over 50 percent domestic market share. With an adjusted 24-hour trading volume of almost $1.1 billion at the time of this writing, the exchange currently ranks as the world’s third-largest crypto exchange, according to Coinmarketcap.

Upbit Denies Allegations

Yonhap also reported that Upbit “strongly denies the allegations.” The investigation into the exchange’s operations started eight months ago.

On Friday, the Kakao-backed exchange released a detailed explanation of what happened. “First of all, we would like to express our deepest regrets for causing much anxiety aroused by the indictment,” the exchange began. “The case is related to some transactions during a three-month period [last year], from Sept. 24 to Dec. 31.” Noting that its exchange was launched on Oct. 24, Upbit explained that all transactions in question were from “when our company was preparing for and had just launched Upbit service. All transactions which took place in Upbit after that period are not related to the case.” The exchange wrote:

Upbit did not commit wash trading (cross trading), imaginary orders (provision of liquidity), or fraudulent trading. The company did not trade cryptocurrencies which it didn’t own, or have its staff and employees benefit from such trading.

Upbit continued to explain that “Liquidity has been provided through a corporate account, and no one was swindled out of benefits or engaged in fake trading during the process.” Upbit, however, admitted that “For about two months after launching the service, some cross trading took place for marketing purposes.” Nonetheless, the exchange claims that “such trading had no influence on the market price, and the volume of such trading took up about 3% of the total trade volume at that time.”

The exchange also noted that its auditor has confirmed three times — on Jan. 19, June 28, and Oct. 8 — that its combined cash and cryptocurrency balance exceeds the amount owed to customers. “As of Oct. 8 when the most recent audit took place, Upbit held about 103% of the cryptocurrencies payable to customers. Also, Upbit’s bank balance is 165% of the cash payable to customers,” claimed the company’s statement released on Friday.

Do you think Upbit is guilty? Let us know in the comments section below.

Images courtesy of Shutterstock and Upbit.

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