Senior Staff Members at Korea’s UpBit Crypto Exchange Indicted for Fraud
Officials at South Korea’s largest cryptocurrency exchange UpBit have been indicted for swindling money from investors and offering fraudulent transactions, reports local new publication Yonhap. Three senior staff members of UpBit have been accused on charges of fraud by the Prosecutors’ Office of the southern district of Seoul. Among the three UpBit founder founder Song Chi-Hyung, is also named.
The prosecutors noted that these three staff members made bogus orders worth 254 trillion won ($226 million) while selling 11,550 BTC to around 26,000 investors. Yonhap reports that these staff members allegedly opened a fake account last year in September 2017. These official made bogus orders for “about two months to inflate the currency transactions and lure more customers”.
UpBit is South Korea’s largest cryptocurrency while alone catering to 50% market share in the country. However, the exchange has denied all the allegations and its role in any sort of imaginary orders and wash trading. The exchange said that it has created the corporate account with its own fiat money and cryptos worth $200,000-300,000 on its platform to protect the customers from “drastic” price changes.
It further confirmed that neither of its staff members have benefitted from the trades done through its corporate accounts. However, the exchange goes to admit that cross-trading did happen for two months after the 24th of October. But again it emphasized that it was not wash trading and no clients were defrauded out of it. UpBit says that prosecutors have only analyzed the buy orders during their investigation but excluded the sell orders.
The Korean crypto exchange notes: “In the early days of the exchange, due to the lack of liquidity, the spread between buy and sell orders was high and the need for matching the global price to facilitate trading was apparent. To achieve this, we employed a technical approach – cross trading”.
It further adds: “The account used during the process was a strictly maintained corporate account, and cross trading was conducted in a way that did not affect the market price. Its use was strictly limited to marketing campaign in the early days of the exchange. Trading commission incurred during the activity did not account as the company's revenue.”
“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.”
A Seoul changes is most likely to issue a court hearing in the coming months.