Experts in the cryptocurrency sector of South Korea have stated that it will be difficult for the government and local financial authorities to file charges against UPbit, South Korea’s biggest cryptocurrency exchange, given that no investors were affected.
Last week, CCN.com reported that UPbit was raided and investigated by local police, Korea Financial Intelligence Unit (KIU) and Financial Services Commission (FSC) due to suspicions of fraud. Local financial authorities accused UPbit of inflating its balance sheet and claiming to have more funds in various cryptocurrencies than their actual amount.
On May 15, various sources confirmed that an audit done by a major accounting firm in South Korea known as Yoojin found that the funds recorded on the balance sheet of UPbit exactly matched the actual holdings of the company and proved that the company is solvent.
“Since early 2018, UPbit created snapshots of its multi-signature wallets and funds stored within them for auditing purposes. Yoojin accounting firm, a major accounting firm based in Seoul, confirmed that all of the funds on the UPbit platform match the cryptocurrency holdings of UPbit stored in its multi-signature wallets,” MoneyToday reported.
The issue is said to have been caused by the lack of wallets for dozens of cryptocurrencies. UPbit has more than 130 cryptocurrencies listed on its platform but only 90 cryptocurrencies have native wallets that allow users to withdraw and deposit directly from and to UPbit. In order to withdraw the other 40 cryptocurrencies, users are required to convert to major cryptocurrencies like bitcoin and Ethereum.
Insiders have claimed that the police investigation has found no irregularities and due to the official audit report released by Yoojin, the cryptocurrency market of South Korea has already started to recover.
Earlier this week, on May 20, in an interview with Korea Herald, an insider stated that the authorities will not be able to bring any charges against UPbit because no investors were affected in any way.
“As no investors seem to have been affected by Upbit’s alleged business practices, it would not be easy for the authorities to bring any charges to bear,” said the source, who asked to remain anonymous due to the sensitivity of the issue.
The expert added that although the investigation has ultimately found no irregularities, it has significantly impacted the local cryptocurrency market in a negative way, leading investors to lost trust in the market.
“But a series of prosecution probes into the exchanges did effectively hurt the overall credibility of the industry,” the insider added.
Oh Jeong-geun, a professor at Konkuk University, one of the most prestigious colleges in South Korea, stated that the investigation would cause investors to leave the cryptocurrency market permanently and to recover from it, both the exchanges and authorities will have to lead an initiative to convince investors that it is safe to invest in the market. Professor Oh said:
“Along with diversification efforts, priority should be put on ensuring the smooth operation of their trading systems in order to guarantee their growth potential. Lack of reliability would cause investors to leave the market forever.”
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Last modified: March 4, 2021 5:07 PM